Credit growth reaches 19-month high at 10.4% in July

Lending activity in the Philippines saw a significant uptick in July, with credit growth accelerating to 10.4%, the highest rate in 19 months, according to data from the Bangko Sentral ng Pilipinas (BSP). This represents a slight increase from the 10.1% growth recorded in June.

Preliminary figures show that loans disbursed by universal and commercial banks reached %u20B112.14 trillion by the end of July, up %u20B11.14 trillion from the %u20B111 trillion reported in the same period last year. This marks the fastest pace of lending growth since December 2022, when expansion was 13.7%, despite the current high interest rate environment.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., described the surge in loan growth as a positive economic indicator, noting that it outpaced the 6.3% growth in gross domestic product (GDP) for the second quarter. He attributed the acceleration in credit growth to improved business conditions, positive employment data, easing inflation, and robust Philippine GDP growth compared to regional peers.

In July, the growth in loans for production activities increased to 8.8%, up from 8.3% in June, amounting to %u20B110.37 trillion compared to %u20B19.54 trillion a year earlier. This category made up 85.4% of total disbursements. Significant contributors to this growth include the real estate sector, which saw a 12% rise in loan disbursements to %u20B12.46 trillion, and professional, scientific, and technical activities, which experienced a more than fourfold increase to %u20B1218.31 billion.

The manufacturing sector also saw an increase in loans, growing by 7.9% to %u20B11.25 trillion, while lending to transportation and storage rose by 20.6% to %u20B1455.9 billion. Credit for wholesale and retail trade, as well as the repair of motor vehicles and motorcycles, grew by 6% to %u20B11.35 trillion.

Consumer lending, however, experienced slower growth, with a 24.3% increase to %u20B11.42 trillion. Within this category, credit card loans surged by 29.2% to %u20B1810.4 billion, auto loans climbed by 19.9% to %u20B1424.9 billion, and salary-based general-purpose consumption loans rose by 16.5% to %u20B1153.6 billion.

This robust lending growth underscores a strengthening economy and increased confidence among both businesses and consumers, reflecting the positive economic conditions and sustained investment in the Philippines.