Household-loan lack helps explain low PH output
There have not been enough household loans happening in the Philippines in recent years, and this lack of credit stimulus helped perpetuate an economy where the so-called bank-penetration rate is one of the lowest, New York-based global credit watcher Moody’s Investors Service said.
In a report made public on Thursday, Moody’s said household indebtedness in the Philippines, along with that of Indonesia’s, remains relatively low compared to peer countries in the region despite the accelerated growth the two countries reported in the past five years.
“The low levels of household debt in these two countries indicate that the recent growth has been from a modest base due to low penetration of banking,” Moody’s said.
“This, in turn, reflects lower levels of economic development in the Philippines and Indonesia relative to Thailand, Malaysia and Singapore,” the international credit watcher added.
The Philippines ended 2013 with household loans as percent of local output, or the gross domestic product (GDP), of only 6 percent. This approximated Indonesia’s household debt-to-GDP ratio of 7 percent.
Despite the poor impression generated by the low incidence of household debt in the country, Moody’s said this has positive impact on the $250-billion economy, as this helps shield the country from the peaking of the credit cycle in the region.
Moody’s further said it anticipates an uptick in household nonperforming loans (NPLs) for those lenders that have been lending heavily to this sector as global liquidity tightens going forward.
“Our analysis shows that within the Asean region, the Malaysia and Thailand banking systems are the most exposed to increased asset-quality pressure in the household segment when rates rise,” Moody’s said.
This relates to developments requiring the US Federal Reserve to begin normalizing its interest-rate structure at some point forward by allowing interest rates to rise, as the world’s largest economy begins to recover and growth accelerates. In the Philippines earlier this week, the Bangko Sentral ng Pilipinas reported an expansion in consumer loans by 13.6 percent to P647 billion in the first quarter of the year.
NPL ratio, meanwhile, was limited to only P38.21 billion during the period, indicating relative success in maintaining loan quality within a desired parameter.
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