The research department of the Metropolitan Bank and Trust Co. (Metrobank) sees modest growth for the Philippines automotive sector in 2013.

According to the bank, auto loans as of June 2012 reached P76 billion, or 17 percent higher compared to the same period in 2011.

The share of nonperforming loans to total auto loans as of that period, while higher compared to that of March, was still lower than the June ratios for the past three years.

 The automotive sector ended 2012 on a positive note, with sales growing by 11 percent year-on-year to 156,655 units sold based on Chamber of Automotive Manufacturers of the Philippines Inc. figures.

Sales of members under the Association of Vehicle Importers and Distributors likewise grew, with 28,400 units sold-a 14-percent increase year-on-year. The jump was attributable to stable supply of imported cars in the second half of the year, and higher demand during the fourth quarter.

The growth last year is a bit above the average annual growth for the past five years, which is 9 percent. This signals that the sector may be well on a recovery path. Strong domestic demand drove the sector, supported by low interest rates and higher incomes.

Furthermore, imports of passenger cars and motorcycles increased by 19 percent in value year-on-year from January to October 2012.

For 2013, Metrobank expects domestic demand to remain robust because of manageable inflation expectations and high liquidity. This may lead the automotive industry to modestly growing this year.

 The latest Consumer Expectations Survey by the Banko Sentral ng Pilipinas further suggest more demand this year, as buying intentions for motor vehicles in the next 12 months improved in the fourth quarter of 2012 compared to the previous quarter.

 Interest rates are also expected to remain subdued, thereby granting easier financing options for interested buyers. However, Metrobank said that downside risks still remain, especially on the supply side since vehicle parts are sourced and assembled across countries within the region.

Meanwhile, the overall weak global economy or the possibility of another natural calamity such as tsunami in Japan and flooding in Thailand may limit growth prospects in the near term.