Bank lending growth eased to near 2-year low in January ’26
Bank lending expanded at its weakest rate in nearly two years in January, reflecting a confidence shock from a high-profile corruption scandal that dampened borrowing appetite despite the low-interest rate environment.
Outstanding loans from big banks went up 9.3 percent from a year earlier to P14.2 trillion during the first month of 2026, preliminary data from the Bangko Sentral ng Pilipinas (BSP) showed. This was the softest annual expansion since the 8.6-percent increase recorded in February 2024.
The central bank closely tracks bank lending as a key channel through which monetary policy affects the economy. The January slowdown came despite a series of interest-rate cuts intended to support growth in an economy strained by a widening investigation into alleged irregularities in state-funded flood control projects.
The scandal has exposed governance weaknesses and delayed public works, weighing on business and consumer sentiment. As a result, economic growth slowed to multiyear lows in the second half of 2025, prompting the Marcos administration to scale back its growth targets.
Lending to businesses rose 8.2 percent to nearly P12 trillion, the weakest pace in 21 months.
Notably, loans to manufacturing firms fell 6.9 percent, extending their decline for the ninth straight month. Lending to construction companies—many affected by the pullback in public spending—contracted by 6.3 percent, the fourth straight month of contraction.
Consumers continued to borrow, with retail loans rising a solid 21.3 percent to P1.9 trillion, driven by credit card and auto lending. Even so, the pace of growth was the slowest in three years.
This happened even as the BSP has already lowered its key policy rate that guides bank lending costs to an over three-year low of 4.25 percent to support the sluggish economy and help restore confidence.
Already, Governor Eli Remolona Jr. has said the central bank’s ability to shore up growth is reaching its limits, adding that lower borrowing costs must be complemented with a rebound in state spending and credible efforts to tackle graft to gain traction.
Worse, Remolona has warned that the central bank could reverse course and raise interest rates if global oil prices reach $100 a barrel and the US dollar continues its rally amid the prolonged war in the Middle East.
“Geopolitical risks could also reduce the odds of future rate cuts amid inflationary pressures,” Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said.
“Slower global and local economic growth could reduce the ability to pay by some borrowers, thereby could make banks more cautious on lending activities as a matter of prudence in managing credit risks,” he added.
