Economists expect more growth in loans and retail investments as the Bangko Sentral ng Pilipinas loosens its monetary policy.

“Loan demand may not react immediately, but the outlook may turn a bit for the better,” Carlo Asuncion, chief economist of Union Bank of the Philippines, told the Daily Tribune last Friday.

The BSP is maintaining interest rates at 6.25 after hiking it up by 425 basis points to control the rise in overall prices of goods and services.

In April, inflation slowed to 6.6 percent from a peak of 8.7 percent in January, according to the Philippine Statistics Authority.

Jun Neri, chief economist of Bank of the Philippine Islands, said this showed BSP rate hikes have started taking effect.

BSP aims to decelerate inflation further to 5.5 percent this year.

Reason for optimism

“As the price of necessities starts to normalize, there is reason for optimism since firms and consumers can afford to spend more on discretionary items. Demand for loans may eventually improve given this,” Neri explained.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation, said the likely growth in demand for loans would require the BSP to lower its reserve requirement ratio or RRR.

This expands the share of funds commercial banks can lend to customers.

“Possible cut in banks’ RRR as early as June could infuse about P130 billion into the financial system,” Ricafort elaborated.

Overall economic growth

Banking activities increased by 12.1 percent from January to March this year, contributing to the 6.4 percent overall economic growth during that period, data from the Philippine Statistics Authority show.

With better jobless rate and quality of jobs among Filipinos, Ricafort said activities in retail investments could also rise.

“Investments would still continue to grow amid improved incomes of business and individuals, alongside further financial literacy and innovations, especially through digital banking channels.”

The Philippine Stock Exchange Index was up by over 86 points last week after the BSP’s announcement of the unchanged rate, which its officials said might still be imposed in the next quarter.

P5,000 minimum investment

Meanwhile, the Department of Finance reported subscriptions for retail bonds offered by the Bureau of The Treasury already generated over P4.37 trillion in 2022 since its launch in 2001. These bonds require a minimum investment of P5,000 and are available through Bonds.PH app, LANDBANK mobile app and some financial entities.

Last Monday, National Treasurer Rosalia V. de Leon said the government plans to offer retail dollar bonds to overseas Filipino workers in the next quarter to raise $2 billion.

More affordable investment fund

Meanwhile, BPI launched last Tuesday a more affordable investment fund with a minimum requirement of P1,000 from P10,000. It will be officially available on 1 June.

“The company believes everyone deserves a chance to grow their wealth and secure their financial future. BPI Wealth is making investing easier and more inclusive,” BPI Wealth president and CEO Maria Theresa Marcial said.

Asuncion said, “Filipinos are way more literate now financially compared to previous years back.”

He believed the downtrend in inflation and widespread investment literacy among Filipinos would support more retail investing in the country.

“It’s a difficult task to help increase investment literacy under whatever inflation or economic growth environment. But, with further disinflation and a potentially improving growth outlook, demand for retail investments may rise.”