Bank lending hits fastest pace since Nov 2011

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Bank lending in the Philippines recorded its fastest growth in May as loans for “expansionary activities” gained pace to fuel the economy.

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Outstanding loans granted by commercial banks, net of reverse repurchase (RRP) placements with the central bank, rose by 21.1 percent in the month following a 20.8-percent increase the previous month, data released by the Bangko Sentral ng Pilipinas (BSP) showed on Monday.

The rate of increase in May is the fastest level recorded since November 2011, when lending growth reached 22.5 percent, according to official figures.

Inclusive of the RRPs, bank lending rose 19.6 percent, accelerating from a 19.4 percent pace recorded the preceding month. On a seasonally adjusted basis, commercial bank lending increased by 1.2 percent for loans net of RRPs month-on-month and by 0.7 percent for loans inclusive of RRPs.

“The continued broad-based growth in bank lending suggests solid growth prospects for the domestic economy. Going forward, the BSP will take appropriate actions necessary to ensure that credit and liquidity conditions remain consistent with its price and financial stability objectives,” the central bank said in a statement.

“Some of the liquidity has fed into the real economy, by way of bank loans, which explains their increase,” private economist Nicholas Antonio Mapa explained in an e-mail to The Manila Times.

The economist said bank lending from a macro perspective also suggests that the economy is being fueled by expansionary activities. However, he noted that a closer look at the top performers reveals how the economy is overly dependent on only select sectors of the economy.

“It explains why we are not able to see balance and exclusive growth as credit and activity remains in real estate and retail trade, with only minimal investments in other areas,” he said.

Comprising more than four-fifths of banks’ aggregate loan portfolio, loans for production activities expanded further by 19.1 percent in May from 18.9 percent in April.

The central bank said the expansion in production loans was driven primarily by increased lending to electricity, gas and water; real estate, renting, and business services; wholesale and retail trade; manufacturing; and financial intermediation.

“Bank lending to other sectors also rose during the month, except for mining and quarrying and public administration and defense which declined by 20.2 percent and 2.2 percent, respectively,” the BSP added.

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