Universal and commercial banks accelerated lending in January by 12.8 percent from 12.2 percent in December last year as other businesses sought more capital.

In a report released last Thursday, the Bangko Sentral ng Pilipinas said loans for production activities grew by 11.8 percent from 10.8 percent based on its preliminary data.

Biggest borrowers

The biggest borrowers were suppliers of air conditioners which increased loans by 23.6 percent, followed by transportation and storage firms with 21.4 percent.

The others included firms in wholesale and retail trade and repair of automobiles which posted a loan growth of 13.9 percent, real estate with 9.8 percent, and manufacturing with 4.6 percent.

Meanwhile, loans to resident consumers slowed to 24.4 percent from 25 percent.

These increased the total outstanding loans to residents by 13.3 percent from 12.4 percent.

Meanwhile, loans to non-residents decreased by 3.5 percent from 5.7 percent.

Higher household loans

Bank of the Philippine Islands chief economist Jun Neri said lower rice prices last month signal higher household loan demand.

“Spending on other items usually deteriorates when rice prices are high. With rice prices now falling, consumer spending may see a notable recovery this year,” he said.

Neri added banks’ loanable funds will be expanded to accommodate more customers after the Central Bank announced the imposition of a lower reserve requirement ratio (RRR) for universal and commercial banks at five percent from seven percent starting 8 March.

“The peso has been stable following the recent 200 bps RRR cut, which is expected to boost lending and give banks greater flexibility in allocating resources,” he said.

Security Bank chief economist Angelo Taningco said the lower RRR will enable banks to distribute additional loans worth over P300 billion.

Remain cautious

However, Neri said consumers might remain cautious as the peso could still depreciate against the US dollar, making the country’s high volumes of imported goods more expensive.

“Uncertainties abroad remain a key concern, making the peso vulnerable given the country’s substantial current account deficit,” the economist said.

Still, the Central Bank expects the overall prices of goods and services to remain manageable within its target range of two to four percent.

Last month, overall inflation slowed to 2.1 percent from 2.9 percent in January, making it the lowest since October 2024 based on data from the Philippine Statistics Authority.