Philippine Markets Newsletter

PH Monday Macro: Are we getting a temporary boost from the holiday season or are the festive vibes a signal of continued economic recovery?

December 19, 2022

As Andy Williams once sang, it’s the most wonderful time of the year. With Christmas just around the corner, we can expect traffic buildup on roads and also in many shopping and dining establishments.

Though consumers are in a festive spending mood, many are still feeling the pressures of rising costs and stagnant wages. While the holiday season offers some emotional reprieve, with talks about another recession still not dying down, investors remain concerned.

We, therefore, take a look at whether or not this particular credit indicator is signaling risks of another economic downturn even amidst the central bank’s push for economic growth in recent months. 

Philippine Markets Newsletter: 
The Monday Macro Report
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In 2021, a remittance agency estimated Filipinos would spend about PHP 37,000 per household during the Christmas season. Assuming the economic growth continued on the upward trajectory it was on, we would have seen a much higher number this year.

However, higher inflation continues to put pressure on consumer spending. At 8% inflation rate in November 2022, this is the highest it has been since 2008.

To manage inflation, the central bank increased rates periodically. Interest rates have gone up by 225 basis points since the start of the year. While raising rates does help inflation from spiraling out of control, it has also made domestic borrowing more expensive.

Though that is the case, the Senior Banks Loan Officers’ Survey (SLOS) tells us there is still some gas left in the tank for economic recovery. 

As a recap, SLOS is a quarterly survey from the BSP that illustrates banks’ lending behavior, an important indicator of the strength of credit activity in the country. These credit standards were based on enforcement and policies of loans.

The red bars with white dots above indicate that 19% of respondent banks tightened their credit standards of lending to enterprises in Q3 2022, either “somewhat” or “considerably,” based on the previous quarter.

Meanwhile, the blue bars in the middle indicate that 77% of banks decided to maintain their credit standards for the quarter relative to last quarter.

Finally, the striped bars below show that 4% of banks “somewhat eased” their credit standards in lending loans to enterprises compared to the previous quarter.

Compared to the Q4 2021 survey, respondent banks appear to be tightening their lending standards overall. However, more banks are keeping the same lending standards in Q3 2022 compared with the previous quarter. This is a sign banks are not growing concerned about companies’ ability to pay their loans. 

As long as banks do not tighten lending further, and companies are able to service their obligations, we are not concerned about another recession happening soon. 

As always, we will continue monitoring this and other credit indicators. If anything flips from positive to negative, that is when we should be concerned. 

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available. 

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data. 

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms. 

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful. 

Stay tuned for next week’s Monday Macro report! 


Angelica Lim 
Research Director
Philippine Markets Newsletter
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