Credit growth in the Philippines is on a “declining” trend amid the high-interest rate environment that tempered demand for loans, all while the rest of the Association of Southeast Asia (Asean) is seeing a “stable” expansion of bank lending, according to a report from Bank of America (BofA).
The report highlighted that the Philippines’ loan growth remained on a decline compared to six months ago, mainly due to external factors. This trend is expected to continue for the next few months, indicating a tepid outlook for credit growth in the country.
Meanwhile, other countries in the region such as Thailand, Malaysia, Indonesia, and Singapore are experiencing stable credit growth, suggesting that bank lending in these nations will remain steady at current levels after recovering from the pandemic.
Despite the challenging environment, credit growth in the Philippines has been recovering, particularly in business loans. Data from the Bangko Sentral ng Pilipinas (BSP) showed that outstanding loans by big banks rose by 9.4 percent year-on-year in March, indicating a faster pace of growth compared to the previous month.
However, the expansion in loans for businesses to fund production activities remained in the single-digit territory, signaling constraints due to the high interest rate environment. Overall, the outlook for credit growth in Southeast Asia remains tepid, with the region expected to grow its economy at a below-trend pace in 2024.
