Analysts note the risks associated with the use of credit cards

Analysts said on Tuesday that the rise in credit card use amid high inflation and interest rates could pose risks to households.

“Now we are seeing high levels of credit card usage,” Nicolas Antonio Mapa, Senior Economist at ING Bank Manila, said on the sidelines of the Bangko Sentral ng Pilipinas (BSP) and International Monetary Fund (IMF) forum on financial stability risks in Cebu.

“[T]traditionally household debt is very low [in the Philippines]”Mapa said.

“[I]If this (growing use of credit cards) continues, it could become a problem for household balance sheets,” he added.

Mapa said consumer credit was meant to be reserved for large purchases only, but unfortunately high inflation meant people had to use it to buy supplies.

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Household loans increased by 21.3 percent in March year on year. Credit card loans also rose 27.9 percent, while payroll-based general purpose consumer loans rose to 67 percent.

Bank of the Philippine Islands economist Emilio Neri agreed that inflation has encouraged people to borrow more, but said the current level is manageable and could be brought down by economic growth.

“Compared to the region, our household debt to GDP (gross domestic product) is one of the lowest,” he added.

Neri, however, noted that geopolitical tensions and uncertainty in the United States could pose risks to the financial environment.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., also said that household debt has been around 10 percent of GDP in recent years, much lower compared to other more advanced Asian countries.

He added that rising credit card debt “may indicate tougher times to deal with higher prices… or could also be a measure of greater confidence to take out loans with better economic and job prospects…”

Bangko Sentral ng Pilipinas assistant governor Johnny Noe Ravalo said the central bank remains mindful of potential risks.