Individual loans grow 12% in first 3 quarters of 2010—BSP

Individual loans grow 12% in first 3 quarters of 2010—BSP
By Michelle Remo
Philippine Daily Inquirer
First Posted 17:50:00 01/03/2011

Filed Under: inflation, Interest Rates, Loan Markets, Economy and Business and Finance, Banking, business
MANILA, Philippines—Banks extended more loans to individual borrowers in the first three quarters of 2010, a development regulators said would help sustain growth in consumption and the overall economy in 2011.

The Bangko Sentral ng Pilipinas reported on Monday that the outstanding amount of consumer loans from universal and commercial banks amounted to P447 billion in January to September last year, up nearly 12 percent from P400 billion in the same period a year ago.

Moreover, the outstanding loans as of the end of the third quarter was up by 3 percent from the P435 billion as of the end of the second quarter.

Loans secured by individual borrowers accounted for about 16 percent of total outstanding loans, worth over P2.8 trillion, disbursed by the banks.

Consumption has been one of the key drivers of the Philippine economy, which in 2010 grew and rebounded sharply during the height of the latest global economic turmoil in 2009.

Regulators said bank lending was partly credited for aiding the acceleration of the economy last year.

Growth in bank lending was due both to appetite of banks to lend and increase in demand for consumer loans. Economists said rising income levels, partly boosted by growth in remittances from overseas Filipino workers, gave confidence to Filipino households to purchase big-ticket assets, such as residential properties and automobiles.

Purchase of these assets was supported by bank loans, demand for which grew as consumer confidence improved, the BSP said.

The central bank said that besides improving consumer confidence, low interest rates likewise helped encourage more individuals to secure loans.

The BSP has been keeping its key policy rates, which influence commercial bank lending rates, at historic lows since July 2009 with the aim of boosting demand for credit. They said loans have helped beef up demand for goods and services, and thus pushed growth of the overall economy.

Overnight borrowing and lending rates of the BSP stand at historic lows of 4 and 6 percent, respectively.

Officials said the low interest rate environment helped the economy avoid a recession in 2009 and register a sharp rebound in 2010.

The economy, measured in terms of gross domestic products, grew by 1.1 percent in 2009 and 7.5 percent in the first three quarters of 2010.

The Monetary Board of the BSP, in its last policy rate-setting meeting for 2010 held on December 29, said it did not see any urgency to raise rates at the moment given projections that inflation would remain benign over the short to medium term.

Inflation is estimated to have averaged at 3.8 percent for 2010, well within the official target of 3.5 to 5.5 percent for last year.

Official inflation for 2010 will be announced this week.

Low interest rates have the tendency to accelerate increase in prices of goods and services, since these boost demand for goods and services.

But the BSP said the increase in consumer prices are staying within tolerable levels, and so interest rates may stay at record lows.

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