Credit growth in July fastest in 19 months

MANILA, Philippines — Lending growth picked up to 10.4 percent in July from the 10.1 percent rise in June, its highest level in 19 months, according to data from the Bangko Sentral ng Pilipinas (BSP).

Based on preliminary data, loans disbursed by universal and commercial banks amounted to P12.14 trillion in end-July, P1.14 trillion higher than the P11 trillion recorded in the same period last year.

Bank lending growth marked the fastest in 19 months or since the 13.7 percent expansion in December 2022 despite the elevated high interest rate environment.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the loan growth in July is a good sign for the economy as it is faster than the gross domestic product (GDP) growth of 6.3 percent in the second quarter.

He said the pickup in credit growth in recent months could be attributed to improved business and economic conditions, especially in terms of improved data on employment in recent months, easing inflation, and Philippine GDP growth among the fastest in the region.

For July, the growth in loan releases to production activities quickened to 8.8 percent from 8.3 percent in June to reach P10.37 trillion from P9.54 trillion a year ago and accounted for 85.4 percent of the total disbursements.

Loans for production activities were driven by the rise in disbursements to the volatile real estate sector, which grew by 12 percent to P2.46 trillion in July and accounted for 20.2 percent of the total.

This was followed by professional, scientific and technical activities. Lending to the sector was more than four times higher in July to P218.31 billion for a 1.8 percent share.

Loans extended to the manufacturing sector also increased by 7.9 percent to P1.25 trillion, accounting for 10.3 percent of the total.

Lending to transportation and storage rose by 20.6 percent to P455.9 billion for a share of 3.8 percent, while credit for wholesale and retail trade, repair of motor vehicles and motorcycles grew by six percent to P1.35 trillion with an 11.1-percent share.

Likewise, consumer lending also booked a slower growth of 24.3 percent to P1.42 trillion in end-July from P1.15 trillion a year ago, cornering 11.7 percent of the total loan disbursements.

Credit card loans soared by 29.2 percent to P810.4 billion from P632 billion. Auto loans climbed by 19.9 percent to P424.9 billion from P354.4 billion, while salary-based general-purpose consumption loans rose by 16.5 percent to P153.6 billion from P131.8 billion.