Lending activities in the Philippines are expected to strengthen as domestic interest rates continue to decline, supporting the country’s economic resilience.
Rizal Commercial Banking Corp. (RCBC) chief economist Michael Ricafort said Friday that the Bangko Sentral ng Pilipinas’ (BSP) series of rate cuts—totaling 100 basis points this year—will likely encourage more businesses to take out loans, fueling domestic expansion.
Latest BSP data showed bank lending, excluding placements in the BSP’s reverse repurchase facility, rose by 10.5% year-on-year in September, slightly slower than August’s 11.2%. Ricafort attributed the slowdown to weather disruptions, reduced infrastructure spending, and weaker business activity.
Business loans grew 9.1%, while consumer loans increased 23.5%—both easing slightly from the previous month. Despite this, Ricafort noted that loan growth remains among the fastest since December 2022, reflecting a positive trend for the economy.
He said the steady rise in consumer loans is supported by the country’s young population, with an average age of 25, and that the consumer loans-to-GDP ratio—currently over 11%—remains lower than in more developed ASEAN economies.
Ricafort added that the BSP’s 250-basis-point cut in banks’ reserve requirement ratio in September 2024 released about PHP400 billion into the financial system. “The RRR cuts could have increased banks’ loanable funds and reduced borrowing costs, helping drive demand for loans that, in turn, support GDP growth,” he said.