Philippine bank lending surged again in September 2023, with outstanding loans of universal and commercial banks rising by 11.4%. This accords to the Bangko Sentral ng Pilipinas (BSP). This marks an improvement from the 11.0% growth observed in August. However is the expansion of the money supply. They known as M3, has seen a slowdown. The move grows by only 9.3% to PHP 20.7 trillion. This is a significant deceleration from the 11.2% growth recorded in the previous month.
Union Bank’s Chief Economist, Ruben Carlo Asuncion, noted that the rising bank lending figures highlight resilient credit demand, even as liquidity growth began to moderate. "Bank lending likely continues to benefit from corporate working-capital and household financing needs. It includes financing higher operating costs," Asuncion explained. Yet, he warned that high inflation, elevated borrowing costs, and weaker growth prospects could eventually cool credit demand.
Resident loans grew by 11.7%, up from August’s 11.3%, driven largely by business activities. Sectors such as electricity, gas, steam and air-conditioning supply. The action manufacturs, real estate, transportation, and retail saw significant lending increases. Meanwhile, consumer loans maintained a strong pace at 16.2%, propelled by ongoing growth in credit card and motor vehicle loans.
Context & Stakeholder Impact
The BSP stressed the importance of monitoring bank lending as a key transmission channel for monetary policy. "The BSP will continue to ensure that bank lending conditions remain consistent with its price and financial stability objectives," the central bank reiterated.
In parallel, liquidity growth has been hit by several factors. This includes the National Government's financing activities. These activities, such as debt issuances and the withdrawal of deposits from the BSP and banks, contributed positively but were offset by a 6.4% contraction in net foreign assets. The BSP aims to maintain domestic liquidity conditions aligned with its strategic priorities of price and financial stability.
The central bank’s commitment comes amid increasing pressures from global economic conditions. The move affects not only financial institutions but also ordinary citizens, who may face tighter financial circumstances as borrowing costs remain high.
Key Takeaways & What Lies Ahead
As bank lending continues to grow, the BSP plans to maintain vigilance over lending practices to ensure that they align with broader monetary policy goals. Given current trends. It lends is expected to maintain double-digit growth in the near term.
However is the slowing growth of the money supply. They combined with persisting high inflation and elevated interest rates, will likely have long-term implications. This could especially impact low- to middle-income borrowers, who might find it more challenging to access credit.
Looking forward, economists forecast that liquidity growth will further moderate. Such trends could potentially influence government policies on financial stability and economic growth. The action requirs close attention from policymakers to balance between sustained economic development and inflationary pressures.
As the Philippines navigates these financial dynamics, the BSP will remain a pivotal player, tasked with ensuring both credit growth and liquidity align with its overarching stability objectives.