MANILA, Philippines — Credit growth picked up at the fastest pace in more than two years in June despite a series of interest rate hikes by the Bangko Sentral ng Pilipinas (BSP) to curb growing inflationary pressures.
Loans granted by the big banks increased by 12% in June against 10.7% in May. This is the fastest growth since the 12.7% growth recorded in April 2020.
Loans disbursed by universal banks and major banks stood at 10.19 trillion pesos at the end of June, 1.09 trillion pesos more than the 9.1 trillion pesos recorded in the same period. last year.
“Sustained credit growth will support the momentum of economic recovery amid the ongoing withdrawal of monetary easing,” the BSP said.
After maintaining an accommodative monetary policy by keeping policy rates at a historic low of 2%, the BSP began raising interest rates by raising rates by 25 basis points on May 19, the first over three years. or since November 2018, in a context of soaring inflation.
This was followed by another 25 basis points on June 23 as the BSP continues to crack down on soaring inflation.
In a surprise off-cycle rate-setting meeting on July 14, the BSP made a huge 75 basis point rate hike, taking the overnight reverse repurchase rate to 3.25% from a historic low of 2%.
BSP Governor Felipe Medalla has already ruled out another huge 75 basis point rate hike for the rate-setting meeting scheduled for August 18 and a surprise off-cycle rate-setting meeting.
After the US Federal Reserve carried out consecutive rate hikes of 75 basis points in June and July, the BSP is ready to use the full force of available measures to manage the ripple effects of external developments.
“In order to manage the ripple effects of these external developments, the PASB stands ready to use the full force of available measures to address potential risks to Philippine inflation and inflation expectations resulting from an overshoot or excessive depreciation of the Philippine peso,” Medaille said.
After falling for eight consecutive months between December 2020 and July 2021 due to uncertainties caused by the COVID-19 pandemic, bank lending has been rising since August last year, with the economy finally absorbing the 200 point declines. interest rates and the reduction in the reserve requirement rate issued by the BSP as part of its response measures to the COVID-19 pandemic.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said loan growth posted positive year-over-year growth for the 11th straight month as the economy reopened further from protocols. COVID-19 quarantine and lockdown restrictions.
The Philippines is expected to record faster gross domestic product (GDP) growth in the second quarter after a stronger-than-expected 8.3% expansion in the first quarter.
“Growth in universal and commercial bank lending, again maintaining double-digit growth recently at 12%, has become one of the bright spots for the Philippine economy and also fundamentally supports faster GDP growth at the future,” said Ricafort.
Ricafort said credit growth continued to accelerate despite BSP policy rate hikes.
Loans to production activities increased by 12% to 8,990 billion pesos in June this year, compared to 8,020 billion pesos in the same period last year and accounted for 88.2% of total loan disbursement .
The real estate sector recorded a strong increase of 18% to 2,130 billion pesos and accounted for 20.9% of total disbursements, followed by the manufacturing sector with a growth of 17.5% to 1,170 billion pesos for a share. of 11.5% as well as wholesale and retail trade, repair of motor vehicles and motorcycles with an increase of 8% to 1,150 billion pesos for a share of 11.3%.
Similarly, loans to the electricity, gas, steam and air conditioning sector increased by 5.2% to reach 1,090 billion pesos, representing a share of 10.8%.
The BSP also reported a 10.6% increase in consumer loans to 903.81 billion pesos for an 8.9% share of total loans. Credit card loans rose 18.9% to 475.94 billion pesos, offsetting a 0.2% drop in car loans to 327.05 billion pesos.