“The Philippines is the only country within ASEAN showing an ‘improving’ trend. It has seen a faster recovery in credit growth to nine to 10 percent and the latest reading of the indicator implies slight improvement from current levels.”
MANILA, Philippines — The Philippines is expected to post the most optimistic credit growth trend across the Association of Southeast Asian Nations (ASEAN), according to Bank of America Global Research.
BofA’s latest analysis showed that the Philippines is the only country within ASEAN showing an “improving” trend, while other economies showed a flat or declining credit growth.
“The BofA ASEAN Credit Growth Indicators are trending flat in Singapore and Thailand, declining in Malaysia and Indonesia, and improving in Philippines,” the bank said.
“The Philippines is the only country within ASEAN showing an ‘improving’ trend. It has seen a faster recovery in credit growth to nine to 10 percent and the latest reading of the indicator implies slight improvement from current levels,” it said.
Based on the latest central bank data, credit growth improved to 11 percent in September from 10.7 percent in August, marking the highest level in 21 months or since the 13.7 percent expansion in December 2022.
Outstanding loans of universal and commercial banks amounted to P12.4 trillion in end-September, P1.23 trillion higher than the P11.17 trillion disbursed in the same period last year.
According to BofA, Indonesia has moved to a “declining” trend, but it still expects credit growth to remain stable at around 10 to 11 percent levels.
Singapore’s outlook remains flat, which reflects mixed regional uncertainty. Meanwhile, Malaysia and Thailand continue to experience soft growth, particularly driven by external pressures.
“Overall, the outlook for credit growth is likely to remain tepid and mixed in ASEAN,” the bank said.
Bank of America’s ASEAN Credit Growth Indicators aims to identify directional trends and key turning points for credit growth across each of the ASEAN-5 countries: Indonesia, Malaysia, Singapore, Thailand and the Philippines.
“We believe this will help gauge how banks’ loan growth are likely to shape up over the next few quarters, with lead times ranging from three to 12 months. It is not designed to produce or forecast scored values of credit growth,” it said.
BofA tracks five country indicators, each composed of equally weighted macroeconomic or market variables that have a predictive relationship with the credit demand growth cycles in each economy.
The bank classifies these variables under four categories: system liquidity, business or retail expectations, rates and prices as well as external factors.
BofA said that their covered banks in ASEAN comprised 50 to 60 percent of total system credit by the end of 2023.
“Given their large contribution to system credit growth, we believe our set of BofA ASEAN Credit Growth Indicators should provide an early indication of the directional trends of credit growth for our covered banks,” it said.