Bank loan growth seen amid lower inflation forecast


The growth of loans by universal and commercial banks (U/KBs) is expected to improve in the coming months on projections of an improving inflation rate.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Monday showed that bank lending expanded by 10.1 percent in March this year, little changed from 10 percent the previous month.

Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said growth of bank lending to date is “still decent” although the latest figure is among the slowest in a year.

He attributed the slower pace of growth in bank lending to higher interest rates both here and abroad, which dampened demand for loans, elevated inflation and risk of recession in the United States.

For one, key rates of the Bangko Sentral ng Pilipinas (BSP) have been hiked by a total of 425 basis points since May 2022 to 6.25 percent to help address the elevated inflation rate in the country.

The rate of price increases in the domestic economy slowed to 6.6 percent last April after hitting its 14-year high of 8.7 percent last January.

However, the average inflation in the first four months this year remains above the government’s 2 to 4 percent target band at 7.9 percent.

Monetary authorities forecast inflation to slow to within-target levels starting in the last quarter of this year, although the average inflation this year is projected to be around 6 percent.

“Going forward, these risk factors are still somewhat overshadowed by measures to further reopen the economy towards great normalcy that fundamentally increased demand for loans amid more jobs/employment, sales, income/livelihood, and other business/economic activities,” Ricafort said.

He said “businesses and industries can also plan better and become more decisive with new investments and expansion plans, which entail more demand for loans/credit/financing and other fund-raising activities.”

“Possible easing of inflation for the coming months would, in turn, also help fundamentally ease interest rates/borrowing costs/financing costs, thereby would also help spur loan demand/growth, going forward,” he added.


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