By Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES is seen having probably the most optimistic outlook for credit growth amongst Southeast Asian countries, Bank of America (BofA) Global Research said.
“The Philippines is the one country inside ASEAN (Association of Southeast Asian Nations) showing an ‘improving’ trend and has seen a faster recovery in credit growth to 9-10%… The most recent reading of the indicator implies slight improvement from current levels,” it said in a report.
Under its ASEAN Credit Growth Indicators index, BofA assesses the “directional trends and key turning points” for credit growth within the ASEAN-5. It gauges how banks’ loan growth is prone to shape up over the following one to 2 quarters.
Compared with its neighbors, the Philippines was the one country to have an “improving” outlook. This was driven by “a rise in import growth and net sales index, partially offset by lower auto sales.”
Meanwhile, Malaysia and Indonesia are seen to have a “declining” outlook, while credit growth in Singapore and Malaysia is predicted to be “flat.”
BofA said its overall outlook for credit growth in ASEAN is prone to remain “tepid and mixed.”
“Our ASEAN economist team highlights an underwhelming growth picture for Indonesia in 2024, driven by soft manufacturing data and a weak textile industry, but believes growth will likely be firmer in 2025, with scope for further gains from the down-streaming sector,” it said.
It also noted the “constructive growth outlook within the near term for Malaysia, boosted by recovery in external demand, healthy labor market conditions and a lift from tourism.”
Latest data from the Bangko Sentral ng Pilipinas (BSP) showed bank lending jumped by 11% yr on yr to P12.4 trillion in September. This was the fastest loan growth since 13.7% posted in December 2022.
Credit growth is seen to expand further amid an improving rate of interest environment, Juan Paolo E. Colet, managing director at Chinabank Capital Corp., said.
“We expect healthy credit growth to proceed in view of looser monetary policy, stable employment, and sustained economic expansion,” he said in a Viber message.
The central bank began its easing cycle in August with a 25-basis-point (bp) rate cut, its first reduction since November 2020. Since then, the BSP has cut borrowing costs by a complete of fifty bps, bringing the important thing rate to six%.
The Monetary Board’s last meeting this yr is scheduled for Dec. 19. BSP Governor Eli M. Remolona, Jr. has signaled the potential of one other 25-bp cut before the yr ends.
“The lending outlook stays positive as corporations have been largely optimistic about business prospects and we see a resilient borrowing appetite from consumers. There may be also pipeline of projects that may require a variety of debt financing,” Mr. Colet said.
Increasing credit activity is seen to proceed amid strong demand and resilient macroeconomic fundamentals, the BSP earlier said in its latest report on the Philippine financial system.
Data from the report showed that gross total loans had jumped by 12.4% annually to P14.3 trillion as of June. Banks’ credit-to-gross domestic product (GDP) ratio stood at 56.4%, improving from 54.9% a yr earlier.
However, Mr. Colet noted risks akin to the incoming Trump administration and its restrictive trade policies.
“The yr ahead could pose some challenges given the potential impact of Trump 2.0, but we’re hopeful that the Philippines can navigate the potential complexities in view of our strong economic fundamentals and special relationship with the US,” he added.
