Credit Growth Alarms BSP of Economic Overheating

Manila, Philippines – Bangko Sentral ng Pilipinas (BSP) dreads economic overheating as credit growth eases down to 19 percent last December. This rate is lower compared to its 19.3 percent record in the previous month of November.

When the economy grows, credit growth usually expands faster than the Gross Domestic Product. In our case, GDP progresses while credit and loans shrink a little behind.

In May last year, bank loans skyrockets to 11.5 percent. Seven months after, December credit growth rate holds the slowest in the chart. Figures for the past seven months are as follows: from 18.7 percent in May, it increased at 19 percent the next month; it ascent to 19.7 percent in July and increased further to 20.4 percent in August. September holds the highest record since 2014 which is 21.1 percent.

Loans from production activities move firmly to 18.5 percent. The previous amount of P5.39 trillion inflates to P6.38 trillion. Loans lent by the banking sectors are at 88.9 percent rate.

Meanwhile, the loans released to real estate sectors picked up at 19.3 percent equivalent to P1.26 trillion. Lending growth for retail and wholesale trade elevates to P996.9 billion. That is 20.1 percent to 13.9 percent share alongside the repairs of motorcycles and vehicles.

Credit growth for manufacturing sectors also escalated to 11.7 percent which equals to P940.06 billion. The air-conditioning and steam supplies, electricity and gas loans surged to 25.4 percent or P830.91 billion.

While all of these loans increase steadily, loan growth in households deflated to 17.2 percent or P561.88 billion. Motorcycle and vehicle loans also ease further at 17.5 percent rate equivalent to P239.56 billion.

However, there was a boost in salary-based loans which runs at 8.9 percent pace. That is equivalent to 70.75 billion. On top of that, the use of credit card magnified to 20.4 percent or P236.73 billion.

If economic overheating happens, it will infuse inflation. It might affect the steady pace rate of within 2 to 4 percent that BSP watches out for.

Nestor Espenilla, the BSP Governor, assured that they would secure economic growth through the extension of liquid proceeds and domestic credit without compromising the financial security goals of the BSP. Of course, while still keeping the prices of goods and services stable.

When inflation occurs, every facet of the economy will be affected. It will reflect in the cost of doing business, mortgages, loans or credit money, just to name a few. Generally, it indicates our cost of living. It is important to uphold the prices of goods and services and other commodities to guarantee economic growth.

About the Author
The Stock Signals Philippines is the online news media arm of Equilyst Analytics. Inc., an SEC-registered stock market consultancy firm in the Philippines that guides Filipinos on long-term investing and short-term trading and offers mentoring services.

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