By means of Luisa Maria Jacinta C. Jocson, Reporter
THE PHILIPPINES is seen as havwith the most optimistic prospects for credit growth in the South East Asian countries, Bank of America (BofA) Global Research said.
“The Philippines is the only country within ASEAN (Association of Southeast Asian Nations) that is showing an ‘improving’ trend and has seen a faster recovery in credit growth to 9-10%… The latest reading of the indicator implies a slight improvement over current levels. ‘, says a report.
Using the ASEAN Credit Growth Indicators index, BofA assesses the “directional trends and key turning points” for credit growth in the ASEAN-5. It measures how banks’ credit growth is likely to develop over the next one to two quarters.
Compared to its neighbors, the Philippines was the only country with an “improvement perspective.” This was caused by “an increase in import growth and net sales index, partially offset by lower car sales.”
Meanwhile, Malaysia and Indonesia are considered to have “declining” prospects, while credit growth is increasing in Singapore and Malaysia is expected to be “flat”.
BofA said the overall outlook for credit growth in ASEAN is likely to remain “tepid and mixed”.
“Our ASEAN economist team highlights a disappointing growth picture for Indonesia in 2024, driven by soft manufacturing data and a weak textile industry, but believes growth is likely to slow. FThis will increase further in 2025, with room for further gains from the downstream sector,” the report said.
The report also noted the “constructive near-term growth prospects for Malaysia, boosted by recovery in external demand, healthy labor market conditions and a revival of tourism.”
The latest data from the Bangko Sentral ng Pilipinas (BSP) shows that bank lending rose 11% year-on-year to P12.4 trillion in September. This was the fastest loan growth since 13.7% in December 2022.
Credit growth is expected to accelerate further in an improving interest rate environment, said Juan Paolo E. Colet, managing director of Chinabank Capital Corp.
“We expect healthy credit growth to continue given looser monetary policy, stable employment and continued economic expansion,” he said in a Viber message.
The central bank started its easing cycle in August with a 25 basis points (bp) rate cut, the first cut since November 2020. Since then, the BSP has cut borrowing costs by a total of 50 basis points, bringing the policy rate to 6%.
The last meeting of the Monetary Board this year is scheduled for December 19. BSP Governor Eli M. Remolona Jr. has signaled the possibility of another 25 basis point cut before the year ends.
“The outlook for lending remains positive as companies are largely optimistic about the business outlook and we see resilient borrowing among consumers. There is also a good pipeline of projects that require a lot of debt financing,” said Colet.
Rising credit activity is expected to continue amid strong demand and resilient macroeconomic fundamentals, the BSP said earlier in its latest report on the Philippine economy. Ffinancial system.
Data from the report shows that gross total loans increased by 12.4% per year to €14.3 trillion as of June. The banks’ credit ratio to gross domestic product (GDP) stood at 56.4%, an improvement from 54.9% a year earlier.
On the other hand, Mr. Colet noted risks such as the incoming Trump administration and its restrictive trade policies.
“The coming year could pose a number of challenges given the potential impact of Trump 2.0, but we are hopeful that the Philippines can navigate the potential complexities given our strong economic fundamentals and special relationship with the US,” he added to it.