MANILA, Philippines — Philippine banks remain increasingly optimistic on the country’s economic growth for the next two years, a survey conducted by the Bangko Sentral ng Pilipinas showed.

Conducted amid one of the worst virus surges of the pandemic, the results of the BSP’s Banking Sector Outlook Survey released Tuesday found that out 48.3% of banks polled were bullish on the domestic economy growing above 6% year-on-year.

BSP polled 173 banks from February to March this year, wherein 150 of these lenders responded. The respondents were composed of universal, commercial, rural, cooperative and thrift banks.

“On the whole, the respondent banks’ gross domestic product growth outlook is consistent with that of the Asian Development Bank which projects that the Philippine economy will grow by 6.5 percent in 2022 and 6.3 percent in 2023 on the back of strengthening domestic demand and reforms supporting investment,” the BSP said in the report.

Universal and commercial banks proved to be the most optimistic of the bunch, projecting the Philippine economy to grow between 6-7% in the next two years while the rest expected GDP growth to land below that.

As it is, the Philippine economy grew 5.6% last year. The economy managed to grow on account of low-base effects and improved domestic prospects as restrictions were eased in short bursts amid the Delta surge.

The BSP admitted that while banks perceived the economy with mixed optimism, the country’s banking system is projected to remain steady. The survey found 66.2% of respondent banks forecast a stable banking system for the next two years.

Universal and commercial banks indicated in the survey that they predict their assets will growing between 5-10% on account of their rosy economic and financial outlook.

That said, the economy shed its vigor as 2022 progressed. Inflation is zooming in, with consumers bearing the brunt of imported inflation, a weak peso, and expensive fuel prices amid a vaunted economic reopening.

The BSP adopted a hawkish posturing and adjusted interest rates in succession since May, now at 3.75% to cool down red-hot inflation. Interestingly, banks surveyed in the BSOS project most of their asset growth in the form of credit expansion.

Credit growth was anemic at the onset of the pandemic before snapping nine straight months of contraction and finally eked out growth in August 2021. The BSP reported 70.7% of banks polled, mostly universal and commercial banks, project double-digit growth in their loan portfolios in the next two years.

Banks were increasingly optimistic about loan quality as 57.3% of BSOS respondents project a non-performing loan ratio exceeding 5% in the next two years. This was a significant improvement from the 63.5% outturn since the preceeding survey.

“Amid the long tail of the COVID-19 pandemic, the Philippine banking system is projected to withstand the legacy risks and challenges of the COVID-19 pandemic within the next two years on account of its stable and sound capital and liquidity buffers, ample loan loss reserves, good earnings performance and prudent risk governance,” the BSP said.