Credit growth slows to 11.8 percent in July

MANILA, Philippines — Bank lending continued to expand in July, though at a slightly slower pace, as both business and consumer loans posted softer growth, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data showed outstanding loans of universal and commercial banks rose by 11.8 percent year-on-year to P13.57 trillion, easing from 12.1 percent in June. Seasonally adjusted data indicated a 0.7-percent month-on-month increase in lending.

Looking ahead, the BSP will ensure that domestic liquidity and bank lending conditions remain consistent with its price and financial stability objectives, the central bank said.

Outstanding loans to residents climbed by 12.4 percent in July, slightly lower than the 12.6-percent expansion in June. In contrast, loans to non-residents fell further by 8.1 percent, following a 6.4-percent drop a month earlier.

Credit to businesses expanded by 10.8 percent to P11.5 trillion, easing from 11.1 percent in the previous month. It accounted for 84.7 percent of total loan disbursements during the month.

The rise in disbursements to the volatile real estate sector quickened to 10.7 percent in July from 9.9 percent a month ago with P2.74 trillion, followed by the electricity, gas, steam and air-conditioning supply sector with a faster increase of 30.3 percent to P1.7 trillion.

The growth in loans extended to the wholesale and retail trade sector slowed to 8.5 percent with P1.51 trillion. On the other hand, loans to the manufacturing sector fell by 6.3 percent to P1.19 trillion.

Likewise, consumer lending also booked a slower growth of 23.6 percent to P1.76 trillion in end-July from P1.42 trillion a year ago.

Credit card loans soared by 29.2 percent to P1.05 trillion from P810.43 billion. Auto loans went up by 19.4 percent to P507.5 billion from P424.9 billion, while salary-based general-purpose consumption loans inched up by 6.4 percent to P163.5 billion.

The BSP closely monitors credit activity as it serves as a key transmission channel of monetary policy, with lending conditions reflecting the impact of interest rate adjustments on overall economic activity.

The central bank’s Monetary Board lowered its policy rates by 150 basis points since August last year, winding down the aggressive rate hikes it did from 2022 to 2023, amid below-target inflation. This brought the key policy rate down to five percent from a peak of 6.50 percent.

The BSP also reported that the growth in domestic liquidity stood at 6.2 percent in July, higher than the revised 5.9-percent increase in June. Money supply stood at around P18.6 trillion as of end-July.