Philippine Bank Lending Cools to 4-Month Low in June Amid Economic Uncertainty

MANILA, Philippines — Bank lending in the Philippines slowed to its weakest pace in four months in June, reflecting mounting anxiety over an economy facing multiple headwinds and a more cautious approach by businesses and households towards taking on new debt. Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that loans from big banks rose 9.8 percent year-on-year to P14.9 trillion. This marked the slowest pace of expansion since February, when lending grew 9.6 percent. The deceleration in credit growth also contributed to a slower expansion in money supply. M3, the broadest measure of liquidity in the economy, increased 10.6 percent to P20.5 trillion in June, easing from 12.8 percent a month earlier. “The moderation in bank lending growth suggests that both businesses and consumers are becoming more cautious and selective in taking on new debt,” said Jonathan Ravelas, senior adviser at Reyes Tacandong & Co. Lending to businesses, which accounts for the bulk of big banks’ loan portfolios, grew 9.2 percent to P12.5 trillion, slowing from 11.7 percent in May. The central bank attributed the moderation to weaker borrowing by key sectors, including construction, education, and other service industries. Consumer lending also lost momentum. Loans to households rose 17.8 percent to P2 trillion, the slowest pace since July 2022. Credit card debt expanded 24.9 percent, easing from 26.3 percent a month earlier, while growth in motor vehicle loans slowed to 8.6 percent from 10.2 percent. “Companies appear to be adopting a wait-and-see approach amid global uncertainties, focusing more on managing cash flow and improving operational efficiency rather than aggressively expanding,” Ravelas said. “On the consumer side, while inflation has eased, many households remain mindful of their finances and are prioritizing essential spending over new borrowing. The key takeaway is that this is less about weak credit availability and more about prudent decision-making,” he added. He continued, “Lending growth remains healthy and positive, indicating that the economy is still expanding, albeit at a more measured and sustainable pace.”