REAL ESTATE PURCHASES DRIVE CONSUMER LOANS

THE Bangko Sentral ng Pilipinas (BSP) said a possible shift in its interest rate policy would be gradual, adding that it would continue to support economic expansion.

“The shift will have to be gradual and it will have to be managed properly so that we don’t experience a sharp reversal in policy,” BSP Governor Amando Tetangco Jr. said on the sidelines of the Social Security System’s (SSS) anniversary.

The BSP has reduced its policy rates by 200 basis points since December last year to record lows of 4 percent and 6 percent for the overnight borrowing and lending windows, respectively.

These rate reductions are aimed at bringing down the cost of borrowing and reducing the financial burden on firms and households. Further, lower policy rates enhance business and consumer confidence, thus sustaining the momentum for economic expansion.

The market expects the BSP to start increasing its key policy rates in March next year as the global economy is expected to begin recovering from the financial crisis while inflation is expected to continue its modest acceleration.

Tetangco said the BSP’s monetary policy stance would remain appropriately calibrated to support domestic economic activity, but will always be mindful of emerging risks to inflation.

From an average of 9.3 percent last year, inflation slowed to 0.2 percent in July this year due to lower prices of oil and food.

Tetangco said the Philippine economy would grow within the government’s forecast of 0.8 percent to 1.8 percent.

“We have seen [the GDP growth] in the two quarters, 0. 6 percent in the first quarter and 1.5 percent in the second quarter where there’s acceleration. That is a good point and consistent with what government has been saying that we’re not falling into recession and [the] economy remains in positive territory,” the BSP chief said.

He said the underlying strength of the economy was supported by the continued liquidity growth and double-digit bank lending growth.

Bank lending grew 11.1 percent year-on-year in June from 10.2 percent in May, while domestic liquidity or M3 grew at a slower rate of 12.6 percent year-on-year in June from 15.0 percent in May.

Consumer loans extended by banks increased slightly in June due to the modest rise in real estate loans, the BSP said.

In a statement, the BSP said borrowings by the consumer sector inched up 3.3 percent to P398.6 billion in the second quarter compared with the first quarter’s P385.8 billion. Year-on-year, lending rose 13.1 percent.

Personal consumption accounts for more than two-thirds of the Philippine economy.

Loan quality remained manageable, as banks registered a bad loan ratio of 9.0 percent from last quarter but inched up from a year ago’s 8.8-percent ratio.

The bulk of the consumer loans went to residential real estate purchases at about 41.4 percent of the total, growing 2.8 percent quarter-on-quarter, and 19.5 percent year-on-year.

Credit card receivables inched up 3.1 percent from last quarter’s P125.7 billion and by 5.7 percent from a year ago’s P122.6 billion

Auto loans increased by 5.5 percent in the second quarter and by 9.0 percent from last year.

By Maricel E. Burgonio, Senior Reporte
http://www.manilatimes.net/national/2009/sept/02/yehey/business/20090902bus1.html