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By Maricel E. Burgonio, Reporter
THE Bangko Sentral ng Pilipinas (BSP), which has
a primary mandate to ensure price stability, has been quite
successful in sustaining low prices and keeping down inflation.
Inflation was only 2.8 percent last year. Due to
pressure from abroad, especially from high food, oil and fuel
prices, inflation suddenly surged in 2008. But it is still much
lower than in our neighboring countries.
The volatility of the international oil prices
and increase of rice price, which the market had not projected
earlier, resulted in higher inflation and is now a threat to the
country’s economic growth.
Inflation in June rose to a 14-year high of 11.4
percent while averaged to 7.6 percent. (However, inflation is
expected to return to single-digit level in the second quarter next
year.)
This led to higher labor wages and transport
fare, which is the main basis for the BSP to raise its interest
rates by 75 basis points for two consecutive meetings in June 5 and
July 17 this year.
The Philippine banking system’s asset base has
grown steadily, as it has managed to sustain its profitability
despite contractions in trading gains and trust department income.
Big banks also have merged, which strengthened
their assets.
BSP Governor Amando Tetangco, Jr. said the
overall asset quality of banks continued to improve with the
non-performing loan (NPL) ratio now moving closer to the pre-crisis
level of around 4 percent.
Banks’ net income grew 9.5 percent year on
year to P62.9 billion last year from P57.4 billion in the previous
year. This was supported by double-digit expansion in interest
income and fee-based services.
“With healthier balance sheets, banks have
been able to post a steady growth in lending,” Tetangco said.
Banks’ loan portfolio expanded by 10.9 percent
to P2.212 trillion last year.
BSP reported the country’s balance of payments
(BOP) surplus increased significantly last year to $8.4 billion.
“The country’s strong external payments
remain a major source of strength for the economy,” Tetangco said.
BSP expected to sustain its surplus position
this year despite the current volatile market condition, which is
expected to be lower at $2.5 billion this year.
Meanwhile, the market expectations on US
economic slowdown were heightened in the first quarter of 2008. It
affected the country’s growth, which is mainly supported by
exports earnings. The bulk of the country’s exports went to the US
consisting primarily of electronics products.
Banks now are facing challenges, as people are
hesitant to get new loans, as lending rates are expected to be
expensive and the BSP may further tighten its key policy rates to
fight high inflation.
The point is that Philippine banks are very
strong compared to those of our neighbors and in the West.
This is because of the conservatism of our banks
for which they have been criticized severely in the old days when
there was no subprime crisis.
Banking in the Philippines is a very tightly
controlled sector. Most banks are family-owned.
They don’t lend to shaky businesses and lend
only to the old blue-chip companies. This made banking here a poor
contributor to massive economic growth.
Banks always demand collateral. And it is this
conservatism and family-oriented nature of the banks that saved it
from the internal earthquake that hit banks abroad.
Banks here never got exposed to the crazy
real-estate temptations that those in the United States and some
European banks succumbed to.
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