Lending growth still ‘acceptable’
SUSTAINED and rapid expansion in bank lending is not a cause of worry for the Bangko Sentral ng Pilipinas (BSP), saying the current pace of credit growth remains “acceptable” and does not require adjustments on interest rates just yet.
“Prevailing credit and liquidity conditions continued to support the appropriateness of present policy settings,” read the minutes of the BSP’s Aug. 10 policy review which was released yesterday.
“The MB ( Monetary Board) noted that indicators of credit expansion were within various internally monitored thresholds, including that the current pace of credit growth remained at acceptable limits.”
The BSP left policy rates untouched at its meeting last month, citing manageable inflation and firm domestic activity. The central bank kept the key policy rate at 3%, with the interest rate corridor spread remaining at 2.5-3.5%.
Bank lending expanded by 19% in June, which was factored in during the central bank’s latest rate-setting meeting. Credit continued to post double- digit growth in the succeeding month, expanding by 19.7%, to clock in the fastest pace seen in four months with the bulk funding production activities, according to BSP data.
However, the central bank saw no immediate need to adjust the benchmark rates as the strong appetite for bank loans simply reflected upbeat economic activity.
“Broad- based bank lending growth reflected solid demand for loans across key economic sectors and households,” the BSP said.
The Philippine economy expanded by 6.5% during the second quarter, picking up from the 6.4% climb posted from January to March fuelled by stronger government spending as more big-ticket projects go live. On the other hand, inflation has averaged 3.1% from January to August, well within the 2-4% target band and a tad below the 3.2% forecast for the entire year.
The Monetary Board will hold its next policy review on Sept. 21.
Analysts at ANZ Research have pointed out “intensifying” imbalances in the Philippine economy as credit growth zooms, alongside a reversal in the country’s external position. The economists said this would prompt the BSP to consider hiking rates by 25 basis points by December. —