More banks plan to maintain their credit standards for households and businesses in the first quarter, while demand for loans remains steady, a survey by the Bangko Sentral ng Pilipinas (BSP) revealed Friday.

The survey results came after the BSP eased its policy rate last August, October and December by a total of 75 basis points to 5.75 percent even as inflation rates stood below three percent in the fourth quarter.

Majority of banks surveyed or 84.2 percent said they will maintain their credit standards for households.

Meanwhile, more lenders or 85.2 percent are also keen on keeping their credit standards for businesses.

For loan demand, 60.5 percent of banks see an unchanged level among households.

More banks or 61.1 percent share the same outlook for business loans.

Rate cuts in effect over a year

BSP Governor Eli Remolona Jr. said policy rate cuts tend to take full effect over one year, resulting in gradual loan growth.

Bank of the Philippine Islands chief economist Jun Neri said loan demand might increase if food prices drop.

“Inflation continued to dampen consumer demand with food spending growing by 4.7 percent, still below the pre-pandemic average,” he said.

“Discretionary spending likewise showed weakness with a notable slowdown in restaurants and hotels as the post-COVID demand dissipated further,” Neri continued.

The economist said lower food prices should encourage consumers and private construction firms to borrow funds for real estate investments and projects.

Amid the still elevated interest rates in the fourth quarter, the BSP reported banks’ non-performing loans ratio worsened to 3.6 percent in October from 3.47 percent in September.

Neri expects the BSP to reduce its policy rate by 50 basis points this year to increase goods and services consumption of households and firms, leading to stronger overall economic growth.