Slower GDP and easing could spur loan growth
By Aaron Michael C. Sy, Reporter
BANKING LOAN GROWTH could quicken as slower-than-expected economic growth in the first quarter puts pressure on the Philippine central bank to hasten its policy easing cycle, analysts said.
“We think that the slower-than-expected GDP (gross domestic product) growth, along with the weak dollar and sustained disinflation, bolsters the case for two to three [or at least 50-basis-point] rate cuts from the Bangko Sentral ng Pilipinas (BSP),” Alfred Benjamin R. Garcia, research head at AP Securities, Inc., said in a Viber message.
The Philippine economy expanded 5.4% last quarter, slightly faster than 5.3% in the previous quarter but slower than 5.9% a year earlier. It was also below the government’s 6-8% target band for the year.
The growth was supported by higher government spending and private consumption, Luis A. Limlingan, head of sales at Regina Capital Development Corp., said in a Viber message.
BSP Governor Eli M. Remolona, Jr. told Bloomberg last week the central bank is open to cutting key rates by 75 basis points (bps) more this year after slower-than-expected April inflation data.
The Monetary Board last month resumed its easing cycle after an unexpected pause in February, cutting benchmark rates by 25 bps to bring the policy rate to 5.5%. Its next meeting is on June 19.
Mr. Garcia noted that while this could support banks’ loan growth, it could also compress their margins. “But overall, we believe that the effect would be net positive for banks.”
In March, bank lending rose 11.8% to P13.19 trillion from a year earlier. This was slower than 12.2% in February and was the slowest since November 2024.
Cristina S. Ulang, head of research at First Metro Investment Corp., expects loan growth to improve despite the below-target economic expansion in the first quarter, citing support from foreign investors.
“Loans will grow as the Philippines cuts a favorable trade and investment deal with the US and the uncertainties are mitigated and investors get clarity on the policy roadmap ahead,” she said.
