Credit growth in the Philippines is expected to remain stable with a growth of 10 to 12 percent this 2020 even as loans and economic growth are projected to be moderate.
In a Jan. 8, 2020 report, S&P Global said its credit growth forecast for the country this year is lower than the 15-percent expansion in 2018 but it pointed out this level is “still solid as policy cuts and approval of key infrastructure supports loan demand.”
“NPLs (non-performing loans) may continue to rise moderately, but Philippine banks have good coverage ratios and capital buffers,” it added.
Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) slashed the central bank’s key policy rates by a total of 75 basis points in 2019 due to sustained deceleration of inflation rate and firm domestic growth.
These cuts are projected to encourage borrowers to take out loans as interest rates decline.
These are also seen as a boost to the government’s infrastructure program as more companies take part in the current government’s priority program.
On Wednesday, the BSP reported that outstanding loans of universal and commercial banks (U/KBs), excluding placements in the central bank’s reverse repurchase (RRP) facility, posted a faster jump of 10.1 percent last November from the previous month’s 9.3-percent rise.
In a report, ING Bank Manila senior economist Nicholas Antonio Mapa attributed the increase in bank lending last November to the impact of the cuts in BSP’s key policy rates.
Monetary officials said the impact of these cuts has a lag of several months.
Mapa said impact of the rate easing is starting to feed into the economy.
He added before the improvement of bank lending last November, it was on the decline which may be partly traced to the slowdown of domestic growth in the first half of 2019.
Growth, as measured by gross domestic product (GDP), slowed to 5.6 percent in the first quarter of the year from quarter-ago’s 6.3 percent.
It further decelerated to 5.5 percent in the next quarter but recovered to 6.2 percent in the third quarter due to the catch-up spending program.
“Strong lending growth moves in line with our expectation for a photo finish 4Q (fourth quarter) GDP to clock in at 6.6 percent, enough to lift full year growth to 6.0 percent,” Mapa said.
The economist particularly cited the investment momentum and durable investment activity which had been an integral part of the growth pullback in the second and third quarters, and the recovery could be crucial to the fourth-quarter finish.
“We expect the Philippines to defy the odds and finish the year on a strong note to complete the tale of two halves, firing all cylinders going into 2020,” he added. (PNA)