The Philippines: Credit growth slowest in over 14 years

  • Credit growth fell to 0.46% y/y in Nov 20, the slowest in more than 14 years, and could even turn negative in Dec 20 due to uncertainties brought about by the pandemic, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).
  • Data from the central bank showed loans extended by big banks amounted to PHP8.99tr in end-Nov 20, 0.46% higher than the PHP8.95tr recorded in end-Nov 19.
  • This was the slowest pace since lending by universal and commercial banks declined by 1.9% in Sep 06. The figure is also lower than the 1.8% growth in lending booked in Oct 20.
  • Statistics posted on the website of the BSP showed that lending for production growing by only 0.64% to PHP7.85tr in Nov 20 from Nov 19’s PHP7.8tr.
  • Disbursements to the real estate sector also grew by a slower 5.5% to PHP1.72tr in Nov 20 and accounted for 18.54% of the total loan disbursements.
  • Loan releases to the wholesale and retail trade as well as repair of motor vehicles and motorcycles contracted further by 6.9% to PHP1.08tr for a share of 11.75%, while lending to the manufacturing sector shrank by 4% to PHP992.85bn for a share of 10.7%.
  • On the other hand, loans for electricity, gas, steam and air-conditioning supply inched up by 3.2% to PHP1.01tr and cornered a share of 10.97%.
  • Likewise, the BSP reported a slower 7.1% growth in household loans to PHP876.73bn in Nov 20 from PHP818.41bn in Nov 19.
  • The increase in credit card loans slowed anew to 17.9% to PHP415.5bn in Nov 20.
  • The Monetary Board has imposed a 24% ceiling on credit card charges effective 3 Nov 20 to ease the burden of borrowers amid the pandemic.
  • The BSP also noted a 3.3% decline in motor vehicle loans to PHP364.42bn in end Nov 20.
  • Credit growth has been slowing as the economy stood still when Luzon was placed under enhanced community quarantine in mid-Mar 20 to slow the spread of the virus.
  • However, businesses and consumers remained wary despite the partial reopening of the economy in Jun 20 when the National Capital Region shifted to general community quarantine.
  • Likewise, banks remained wary of extending more loans despite the aggressive rate cuts by the BSP as the industry’s gross non-performing loan (NPL) ratio hit the highest level in more than seven years at 3.81% in end-Nov 20 from 3.72% in Oct 20.

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