MANILA, Philippines — Bank lending sustained its ascent in October, crushing expectations of a slowdown as a reopened economy continues to spur loan growth despite rising interest rates.
Excluding lending among each other, outstanding loans of universal and commercial banks grew 13.9% year-on-year in October, higher than the 13.4% expansion recorded in September, the Bangko Sentral ng Pilipinas reported Tuesday.
Data showed this was the 15th straight month of loan growth despite the BSP’s aggressive rate hikes meant to temper demand that’s fueling a brutally high inflation. Month-on-month, credit grew 1.1%.
In an e-mailed commentary, Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the sustained loan growth could translate to faster economic growth.
This, he said, would convince the BSP that the economy is strong enough to absorb more rate hikes, especially in the face of a hawkish US Federal Reserve.
But Ricafort warned that inflation remains a major threat to credit growth.
“Ironically, higher inflation and interest rates would also lead to higher borrowings by some sectors to make up for higher prices on investments, operating costs and other inputs, as well as to deal with higher debt servicing costs/interest expense for some borrowers,” he explained.
Broken down, lending to businesses rose 12.5% on-year in October from 12.3% growth in the preceding month.
Similarly, consumer loans jumped 22.6% on an annual basis, faster than the 20.6% expansion back in September. The BSP attributed this to increase in credit card loans, motor vehicle loans and salary loans.