Credit growth slows in September

MANILA, Philippines — Credit growth slowed for the sixth straight month to hit the slowest pace in almost two years in September as higher-for-longer interest rates continued to bite, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data from the BSP showed that loans disbursed by universal and commercial banks went up by 6.5 percent to P11.17 trillion in end-September from P10.49 trillion in the same period last year.

This was slower than the 7.2-percent increase recorded in August and was the slowest since the 4.8-percent growth recorded in December 2021.

Bank lending activities have been moderating in the past few months due to the lagged impact of the aggressive rate hikes delivered by monetary authorities to tame inflation and stabilize the peso.

Despite the series of aggressive rate hikes delivered by the Monetary Board since May last year, credit growth increased by double-digit level since April 2022 until it reached a high of 13.9 percent in October and November 2022 as the economy further reopened.

From a double-digit credit growth of 10.2 percent in March, the increase in bank lending slowed to 9.7 percent in April, 9.4 percent in May, 7.8 percent in June, 7.7 percent in July, 7.2 percent in August and 6.5 percent in September.

“Lending to productive activities markedly slowed to 4.9 percent from double-digit growth rates in 2022,” China Bank chief economist Domini Velasquez said.

The BSP remains the most aggressive central bank in the region after raising key policy rates by 450 basis points, including the 25-basis-point off-cycle hike on Oct. 26 to prevent supply-side price pressures from inducing additional second-round effects and further dislodging inflation expectations.

For September, the rise in loan releases to production activities slowed further to 4.9 percent from 5.5 percent in August to reach P9.65 trillion from P9.2 trillion in the same month last year, and accounted for 86.4 percent of the total disbursements.

The growth in disbursements to the volatile real estate sector eased to five percent, reaching only P2.23 trillion, followed by the wholesale and retail trade, repair of motor vehicles and motorcycles with a slower