Bank lending in the Philippines continued to grow at a double-digit pace in May, sustained by lower interest rates and cuts in reserve requirements by the Bangko Sentral ng Pilipinas (BSP), which freed up hundreds of billions of pesos in additional funds for lending or investment.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the expansion in May was the fastest in more than two years, reflecting stronger demand for credit as businesses and households recovered from the pandemic.
“Loan growth has been sustained at double-digit levels as more industries bounced back, even exceeding pre-pandemic activity in some sectors,” Ricafort said. He noted that this growth trend has been supported by BSP’s monetary easing since August 2024, mirroring rate cuts by the US Federal Reserve.
Data from the BSP showed bank lending rose 11.3 percent year-on-year in May, slightly faster than April’s 11.2 percent and the highest since December 2022. In nominal terms, peso-denominated loans reached P13.37 trillion.
Ricafort noted this outpaced first-quarter GDP growth of 5.4 percent and bodes well for the second half of the year. “The environment remains conducive to credit expansion and investment activity, which are key drivers of GDP,” he said.
RRR cuts
The BSP’s phased cuts in banks’ reserve requirement ratio (RRR) also played a critical role. Last year, the central bank reduced RRR, releasing about P400 billion into the financial system. In March 2025, an additional P330 billion in bank funds was unlocked.
“These are not just extra loanable funds,” Ricafort explained. “They also support investments in bonds, equities, foreign exchange, real estate, and other financial assets—boosting liquidity across markets.”
He said the increased supply of credit and reduced borrowing costs contribute to stronger economic recovery and investment valuations, as long as inflation remains well anchored.
Liquidity growth
The BSP also reported that the country’s money supply, or M3, expanded by 5.5 percent year-on-year in May to P18.35 trillion, supporting sustained lending growth. The central bank said it will continue to ensure that domestic liquidity and credit conditions remain aligned with price and financial stability goals.
Productivity loans, which include business lending, grew by 10.2 percent to P11.35 trillion in May, nearly unchanged from the 10.3 percent recorded in April.
Among business loans:
• Real estate lending rose by 8.7 percent to P2.70 trillion
• Wholesale and retail trade, and repair services climbed 9.8 percent to P1.50 trillion
• Loans to transport and storage surged 14 percent to P519.74 billion
Consumer lending also remained strong, growing 23.7 percent to P1.70 trillion in May, led by auto, credit card, and salary-based loans—slightly lower than April’s 24 percent growth.
Credit and liquidity flows
Private sector borrowing continued to rise, with BSP data showing claims on the private sector grew by 10.9 percent in May, while claims on the domestic sector—including government and private entities—rose by 10.7 percent.
Net claims on the national government rose 9.1 percent, slightly lower than the 9.3 percent posted in April.
Ricafort noted that during economic downturns such as the pandemic or global financial crises, M3 (the overall money supply in the economy, including various forms of liquid assets held by the public) tends to grow faster than loan activity. This reflects a buildup in liquidity through central bank actions such as quantitative easing and RRR cuts.
“These monetary measures help counteract economic headwinds by lowering borrowing costs and ultimately supporting a sustained recovery,” he said.
