THE SLOWDOWN in credit growth despite the rounds of monetary easing by the central bank could be blamed on a decline in loans to the manufacturing sector, according to Fitch Ratings.

Aside from this, the ratings agency also attributed the credit growth slowdown to a lag in the effects of the rate cuts done by the central bank earlier this year.

“We believe that the slowdown could be partly attributed to a generally weaker external environment, amid the global trade tensions,” Fitch Ratings’ Asia Pacific Banks’ team said in an e-mail to BusinessWorld on Wednesday.

Latest data from the Bangko Sentral ng Pilipinas showed loans disbursed by big banks in October expanded by 9.3%, a slower pace compared to the 10.5% in September. Inclusive of reverse repurchase agreements, bank lending rose 9.1% in October, also a slower pickup compared to the 10.1% seen in the previous month.

Lending to the manufacturing sector slipped by 1.6% year on year to P1.037 billion from P1.054 billion. It also dipped by 0.8% on a monthly basis from the P1.041 billion worth of loans disbursed in September.

The ongoing trade rift between the world’s two biggest economy has long dented the manufacturing industries of countries, including our Asian neighbors such as Singapore, Malaysia, Japan, and Korea.

Meanwhile, analysts pointed out that the Philippines has been insulated from the trade war due to being a less export-oriented state and its limited exposure to the manufacturing sector.

“Consumer and business sentiment indicators have been strengthening in recent months which should bode well for loan growth if it translates into economic activity,” Fitch Ratings said.

Loans disbursed for household consumption by universal and commercial banks grew 26.7% year on year in October to P805.934 million from P635.997 million. This is a pickup from a pace of 26.2% expansion in September, BSP data showed.

Fitch also said the recent rate cuts have yet to be felt by the financial markets.

“The effect of recent rate cuts could also be lagging, as businesses have been waiting for rates to bottom before taking on credit to expand,” the credit rater said.

Earlier, BSP Governor Benjamin E. Diokno said it could take time before the market fully feels the effect of its easing moves, considering the aggressive 175-basis-point (bp) hike in 2018 amid a high inflation environment.

“’Yung growth kasi siguro partly ’yung tightening nung 2018 (Slow loan growth could be partly due to the tightening in 2018 totaling 175 bps)… As I said, monetary policy works with a lag. So may impact talaga ’yun, kaya nga we started unwinding (It really has an impact, that’s why we started unwinding),” Mr. Diokno told reporters on the sidelines of the BSP’s Christmas lighting ceremony on Monday evening.

Following 75 bps of rate reductions this year, key interest rates stand at four percent for the overnight reverse repurchase facility, 3.5% for overnight deposit, and 4.5% for overnight lending. — L.W.T. Noble

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