RISING CREDIT was behind a recent increase in investment, the Department of Finance (DoF) said, by way of disputing the Philippines’ decline in ranking on the World Bank’s ease of doing business list due to weak scores in access to credit.
“Investment growth was made possible by the rapid growth in credit provided by the financial sector,” the DoF said in an economic bulletin on Monday.
Domestic lending grew 15% year-on-year to P11.35 billion at the end of August, equivalent to 64.8% of gross domestic product GDP for the eight months to August.
The DoF noted that credit growth averaged 13.7% over the past six years, and accounted for 56.1% of the economy.
The Finance and Trade departments have challenged the results of the World Bank Doing Business 2019 report, saying it was “grossly inaccurate and understated” and claimed that access to credit as a driver of growth was not properly documented, leading to the decline in the Philippines’ overall ranking to 124th, 11 notches down from the 2018 report.
Officials said the World Bank did not access data from the Philippines’ largest credit information database, thereby hurting the country’s score.
“Despite the rapid growth of credit, the World Bank Ease of Doing Business Survey 2019 wrongly gave the Philippines lower ratings in its Getting Credit Indicator compared to its 2018 survey. The reason is the failure of the World Bank’s survey team to gather data from three credit rating bureaus which would have raised the population coverage of credit information of the country to a level above the 5% benchmark. This led to the Philippines dropping in the rankings,” according to the economic bulletin.
The World Bank has yet to respond to queries at deadline time.
“Compared with neighboring Asian countries, the Philippines has among the highest real growth in credit provided by the financial sector,” the DoF said.
It said the Philippines posted the second-highest rate of credit growth of 11.4% in 2017, behind the 12.6% of Singapore — which was ranked the world’s second most competitive economy.
Vietnam posted 8.1% credit growth, while China came in at 6.9%.
From 2012 to 2017, the Philippines’ average credit growth was the fourth-highest at 20.2%, compared with China at 30.7% Vietnam at 23.3% and Singapore at 22.5%.
“Credit growth is sustainable; it is supported by a similarly rapid growth in bank deposits,” the DoF said.
Bank deposits rose 13% to P12.45 billion in the eight months to August. It averaged 12.9% annually since 2011, and accounted for 75.3% of GDP as of August 2018, up from 55.4% in 2011.
Despite rapid credit growth, the loan-deposit ratio remained “manageable,” at 75.3% according to the DoF. — Elijah Joseph C. Tubayan