Philippine Markets Newsletter

PH Monday Macro: Consumer loans indicate that the economy is heading in the right direction

July 2, 2023

Household final consumption expenditure makes up around 76% of the Philippine economy. So, to see how the economy is doing, we should also ask ourselves how the consumers are doing.

A great indicator to understand consumers’ level of confidence is through credit. A reason for this is because it indicates how financially healthy they are.

Today, we will be looking into consumer loans.

Philippine Markets Newsletter:
The Monday Macro Report
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A great way to measure the financial health of consumers and a macroeconomic outlook of the Philippine economy is through consumer loans.

Consumer loans stimulate economic activity by providing consumers with the purchasing power they need to buy goods and services.

When consumers spend more, businesses make more sales, which can translate into higher profits and potentially more hiring to reduce unemployment rates. This cycle can drive the growth of the overall economy.

Every quarter, the Banko Sentral ng Pilipinas (BSP) publishes how much consumer credit is in the banking system.

The consumer loans section is broken down into five categories: motor vehicle/auto loans, credit card receivables, salary-based loans, real estate loans, and other consumption loans.

After a two-year halt caused by pandemic restrictions, total consumer loans has resumed its upward rise in 2022. Among the five categories of consumer loans, the residential real estate loans and credit card receivables combined make up 66.8% of total consumer loans as of the fourth quarter of 2022.

Despite the current high inflation rate environment, a continuous rise in consumer loans signifies that consumers are confident in their financial stability and can afford to take on financial risks.

This gives a promising outlook for the Philippine economy.

With residential real estate loans taking up the largest portion of total consumer loans, this can lead to an increase in infrastructural development over the following years, allowing more job opportunities and business activities that could contribute positively through multiple sectors.

Additionally, a continually increasing amount of consumer loans can signal a healthy banking sector. As these banks continue to approve loans, it shows their confidence in their customers being able to pay off their loans.

Subsequently, a strong banking sector can drive an increase in both local and foreign investments.

While mainstream financial news outlets suggest the Philippines is heading towards a recession due to high inflation and a high interest rate environment, we believe it is not the case. Consumers are holding up well and are driving up the economy.

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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