Inflation likely within 7.5-8.3% range in January 2023: BSP Bank lending expands by 13.4% in December 2022

Bank lending expanded by 13.4 percent in December 2022 compared to the same month in 2021, the Bangko Sentral ng Pilipinas said on Tuesday citing preliminary data.

The BSP said the amount of outstanding loans of universal and commercial banks, net of reverse repurchase (RRP) placements with the BSP, was slightly slower than the growth rate of 13.9 percent (revised) in November.

“On a month-onmonth seasonally-adjusted basis, outstanding universal and commercial bank loans, net of RRPs, also decreased marginally by 0.04 percent,” the BSP said.

Loans for production activities expanded by 12.1 percent in December driven largely by borrowing for real estate activities, manufacturing, electricity, gas, steam and airconditioning supply, wholesale and retail trade, repair of motor ve- hicles and motorcycles, and information and communication.

Inflation is expected to remain elevated this month despite the projected deceleration from the 14-month high in December due to the higher prices of utilities and commodities, the Bangko Sentral ng Pilipinas (BSP) reported Tuesday.

Consumer loans also rose by 24.8 percent in December from 24.2 percent (revised) in the previous month, reflecting the faster year-on-year growth in motor vehicle loans.

“The sustained growth in credit activity and ample liquidity will continue to support the recovery of economic activity and domestic demand. Looking ahead, the BSP will ensure that liquidity and credit conditions are in line with its primary mandate of promoting price and financial stability,” the central bank said.

Last year, the BSP began tightening monetary policy, raising its benchmark rate from a record low of 2 percent to a 14year high of 5.5 percent, as it tried to tame inflation.

The BSP is expected to raise interest rates again in its next policy-setting meeting next month.

The central bank said it projects inflation to fall within 7.5% to 8.3%, following the 8.1% recorded in December which was the fastest since the 9.1% recorded in November 2008.

The latest forecast range is higher than the 2% to 4% target of the government.

“Upward price pressures for the month are expected to emanate from higher electricity rates, ap- proved water rate rebasing, higher domestic petroleum prices, uptick in the prices of key food items, and the annual increase in sin taxes,” the BSP said in an emailed statement.

The Manila Electric Company (Meralco) hiked its overall rates for typical household customers by 62.32 centavos per kilowatt-hour (/kWh) to P10.9001/kWh this month, translating to an increase of around P125 in the total bill of a residential customer consuming 200 kWh.

Pump prices have also been hiked in four of the five weeks of January, with year-to-date net increases at P5.90 per liter for gasoline, P2.05 per liter for diesel, and P3.20 per liter for kerosene as of January 24, 2023.

The BSP noted, however, that the increases could be offset by the reduction in the prices of liquefied petroleum gas (LPG) as firms rolled back prices by as much as P4.20 per kilogram during the month.

It also cited the appreciation of the Philippine peso, which has returned to the P54:$1 level after hitting an all-time low of P59:$1 last year. BSP Governor Felipe Medalla in December said he expects inflation to start normalizing this month after peaking in December, and return to “normal” by the third or fourth quarter of the year.

“The BSP will continue to adjust its monetary policy stance at the necessary pace to prevent the further broadening of price pressures and monitor emerging price developments closely in accordance with the BSP’s price stability mandate,” the central bank said Tuesday.