Incoming Philippines central bank chief says concerned about rapid credit growth

MANILA The Philippines central bank is closely watching the rapid pace of domestic credit growth, its incoming governor said on Wednesday, even though he said it was being driven by legitimate demand.

“We’re not being complacent about it,” Nestor Espenilla said in an interview. Espenilla, who now heads banking supervision, will take the helm at the central bank next month.

Bank lending in the Southeast Asian nation has been rising at a double-digit pace for at least nearly two years now. In April, it grew an annual 19.2 percent, with the bulk of loans going to real estate, manufacturing and information and communication.

“We are closely monitoring these developments,” Espenilla said. “These can lead to problems if credit is supporting businesses that may be more vulnerable to cyclical turns.”

Espenilla also said the Philippines economy, one of Asia’s fastest growing, was in “good shape” and inflation was “under control.”

Amid a robust economy and tame inflation, the central bank is likely to keep benchmark interest rates steady when it holds its next policy meeting on June 22.

The Philippines is pinning growth plans on higher infrastructure spending to create jobs, stimulate the economy and attract foreign investors put off by high power prices and poor roads and ports.

It remained one of the fastest-growing economies in Asia in the first quarter, with gross domestic product rising an annual 6.4 percent, marking 73 quarters of uninterrupted growth. The government is targeting growth of between 6.5 percent and 7.5 percent this year.

(Reporting by Karen Lema- Writing by Manolo Serapio Jr.- Editing by Raju Gopalakrishnan)