Lending by Philippine banks posted double-digit growth of 12.8 percent in January 2025, the Bangko Sentral ng Pilipinas (BSP) said in a report released over the weekend.
The BSP said bank loans rose to P13.02 trillion from P11.54 trillion a year earlier, marking growth which an analyst called the “fastest in two years, or since December 2022.”
Outstanding loans to Philippine residents grew by 13.3 percent in January to P12.89 trillion, while outstanding loans to non-residents dropped by 3.5 percent to P330.9 billion, the BSP said.
Loans for production activities rose 11.8 percent to P11.09 trillion from P9.92 trillion.
BSP said this was due to a sustained increase in lending to key industries such as real estate, electricity, gas, steam, and air-conditioning supply, wholesale and retail trade, repair of motor vehicles and motorcycles, transportation and storage, and manufacturing.
Consumer loans to residents grew by 24.4 percent from P1.29 trillion to P1.60 trillion.
The BSP said consumer loans were driven by increases in credit card and motor vehicle loans.
Michael Ricafort, RCBC chief economist, said in a statement the 12.8 percent bank lending growth “is the fastest in two years, or since December 2022, and more than twice as better than the fourth-quarter 2024 GDP growth of 5.2 percent.
Ricafort attributed the increase to the policymaking Monetary Board’s policy rate cuts of -0.75 in 2024 to a two-year low of 5.75 percent.
“The relatively benign inflation could still justify further cuts in local policy rates that would, in turn, lead to lower borrowing costs,” Ricafort said.
He said February’s loan growth could be faster after the cut on the banks’ reserve requirement ratio (RRR) that took effect in October 2024 and infused about P400 billion into the banking system.
“For the coming months, the latest RRR cut announced on February 21, 2025, and effective March 28, 2025, would again infuse about P330 billion into the banking system — that would increase banks’ loanable funds, and could also reduce intermediation costs and overall lending rates,” Ricafort said.
M3 money supply expands 6.8%
The BSP, in a separate statement, said domestic liquidity—M3 or money supply that measures the total amount of money in circulation—grew 6.8 percent year-on-year to P18.15 trillion in January from P16.99 trillion.
M3 comprises currency in circulation plus bank deposits and deposit substitutes, such as commercial papers and promissory notes.
Domestic claims expanded by 10.9 percent in January to P20.27 trillion from P18.48 trillion in January 2024.
Claims on the private sector grew by 13.1 percent in January to P13.08 trillion from P11.56 trillion in the year-earlier period.
The central bank said claims on the private sector grew “with the continued expansion in bank lending to non-financial private corporations and households.”
Ricafort said January’s 6.8 percent rise in M3, however, was the slowest in 3 months and also among the slowest in more than 12 years “amid the peso liquidity siphoning measures of the BSP as part of the monetary policy efforts to better manage inflation and ensure the central bank’s price stability mandate.”
“Slower M3 growth recently is still fundamentally consistent with the relatively tighter monetary policy measures in recent months, particularly since 2022, as local monetary authorities siphon off some of the excess liquidity in the financial system,” Ricafort said.
“M3 could pick up largely after the latest cut in banks’ RRR,” he added.
Ricafort said bank-loan growth tends to be faster as compared to M3 growth during better economic conditions.
However, he said, M3 growth tends to be higher than bank-loan growth during economic downturns amid the infusion of more liquidity into the financial system by monetary authorities through various monetary easing measures.
