Local credit growth has accelerated tremendously in the past 18 months, reflecting a trend in at least five countries in Southeast Asia that has led private analysts to raise the yellow flag.

The global lender HSBC was the first to point out the accelerating credit growth in South Korea, Malaysia, Singapore, Thailand and the Philippines, noting that economic growth in these countries was once again becoming credit-driven.

Regulators, like the Bangko Sentral ng Pilipinas, encourage credit growth at a pace fast enough to create its own forward momentum but not too fast to create unintended consequences, such as price bubbles or rising inflation.

HSBC in Manila said sequential credit growth in the Philippines averaged more or less 8 percent in June 2010 but this has rapidly accelerated to 25 percent in July this year.

On the same day HSBC released the region’s credit-growth data, BSP Governor Amando M. Tetangco Jr. reported bank loans expanding at a tremendous rate of 51.2 percent, equivalent to loans totaling P3.34 trillion as of end-June 2011 versus year-ago loans of only P2.2 trillion.

But to Tetangco, this credit growth matched the activities of the real sector and reflected the steady pace marked by the country’s credit-to-GDP ratio averaging 39.6 percent as of June 2011.

According to Tetangco, this was not radically different from the 2006 credit-to-GDP ratio averaging 40.2 percent, suggesting a relatively stable relationship between economic activity and credit exposure.

“This ratio is not too high so as to raise overheating alarm bells and not too low as to suggest a market without momentum,” Tetangco said.

The numbers also prove that Philippine banks have the financial capability to support the real economy by allocating funds to deserving borrowers, he said.

It was noted that while bank lending accelerated, the incidence of soured or non-performing loans stood at a low 2.25 percent as of end-August and that this much loan portfolio potentially at risk have provisions in excess of 100 percent.

HSBC said the past 18 months have seen rising credit intensity among countries in Asia, the Philippines included.

It has plotted bank lending as share of GDP already past the peak level in 1997 when the region was engulfed in a region-wide financial crisis.

HSBC also said private credit-to-GDP ratios have risen in all countries across Southeast Asia, including China and Japan.

It was noted that Manila has the fourth-largest government debt as percent of GDP after Indonesia, Malaysia and Vietnam but the lowest in the region at around three, in terms of household bank loans as percent of GDP.

India and Indonesia posted household bank credit averaging 11 percent and 12 percent, respectively, both of which pale in comparison to Taiwan’s 63 percent of GDP, HSBC said.