According to an article by Inquirer.NET, lending activities in the Philippines' large banks normalized from pandemic-related disruptions, resulting in a slower pace of loan growth for the second consecutive month. The total value of loans extended to clients grew by 10.4% to P10.7 trillion in January 2023, compared to 13.7% in December and 8.4% in January 2022. Despite the slowdown, the aggregate value of outstanding loans granted to businesses and consumers has been growing year-on-year for 18 consecutive months. The Monetary Board raised its key policy rate by 3.5 percentage points to 5.5% over nine months to January, from a record low of 2%. In January, outstanding loans net of short-term loans to the Bangko Sentral ng Pilipinas (BSP) were "broadly unchanged," having decreased by 0.2%.
Philippine residents borrowed 10.2% more at P10.4 trillion, slower than the 13.5% growth rate in December. Loans granted to businesses grew by 9.2% at P9.4 trillion, compared to 12.6% in December. The largest amounts were lent to real estate activities, wholesale and retail trade, repair of motor vehicles and motorcycles, manufacturing, electricity, gas, steam and air-conditioning supply, and financial and insurance activities. The growth of consumer loans to residents slowed to 20.3% at P1.03 trillion in January from 25.1% in December, while outstanding loans to nonresidents slowed to 16.8% at P312 billion after expanding by 19.9% in the previous month. The BSP believes that "brisk credit growth and adequate liquidity will continue to sustain the momentum of economic growth."
The slowdown in loan growth in the Philippines' large banks could be a sign of rising interest rates affecting borrowing. While the Monetary Board has raised its key policy rate to curb inflation, it could also dampen economic growth if it results in reduced borrowing and investment. Adequate credit growth and liquidity are essential for sustaining economic momentum, and policies that balance inflation control with economic expansion are necessary for long-term growth.