Philippines: Rate hikes to ease credit growth in Philippines — Moody’s

  • Moody’s Investors Service said credit growth may slow down to single digit level after a series of rate hikes by the Bangko Sentral ng Pilipinas (BSP).
  • Simon Chen, vice president and senior analyst at Moody’s, said Moody’s sees a loan growth of between mid to high single digit on the back of the country’s robust macroeconomic conditions.
  • Data from the BSP showed bank lending grew 18.4% to PHP6.95tr in 2017 from PHP5.87tr in 2016 due to higher loan disbursements for production activities.
  • Chen told reporters the country’s banking sector may benefit from rising interest rates through higher profits with the expected shift to high yielding retail from corporate loans.
  • The BSP has so far raised interest rates twice in 2018 with a cumulative increase of 50 basis points to curb rising inflationary pressures from higher global oil prices as well as the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.
  • “We do think that the rate increases will be gradual and modest so the adjustment to higher interest rates within the households and corporates the adjustments will be very manageable,” Chen said.
  • Moody’s vice president and senior credit officer Christian de Guzman said the back-to-back rate hikes imposed by the BSP would provide stability in slowing the country’s credit growth.
  • Chen said Moody’s expects a loan growth of “between mid to high single digit” which is “quite a good number” for the Philippines. Banks’ revenue growth prospects will continue to be strong in 2018, he added.
  • Meanwhile, President Rodrigo Duterte’s string of inflammatory remarks and policy shifts have fuelled concerns that investor’s confidence in the country has eroded.
  • Moody’s, in 2017, affirmed the Philippines’ “Baa2” sovereign credit rating—a notch above the minimum investment grade—and maintained the outlook at “stable” on expectations of strong economic growth.
  • According to De Guzman, concerns on overheating have been allayed after the central bank hiked interest rates, adding that the Philipine economy is expected to remain resilient.

External Link: https://www.philstar.com/business/2018/06/30/1829089/rate-hikes-ease-credit-growth-philippines-moodys

External Link: https://www.philstar.com/business/2018/06/28/1828771/stable-philippine-banking-sector-seen-benefiting-high-interest-rates

External Link: https://www.philstar.com/business/2018/06/28/1828754/moodys-philippines-political-risks-remain-elevated-have-not-stalled-reforms

30-Jun-2018


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