A Rising Nation with a Resilient Financial Sector
The Philippine sovereign, as of December 2012, is one notch away from investment grade in three of the world’s most credible crediting agencies. The country’s stock market also posted 38 record-highs in 2012 and 68 record-highs since 2010. The Philippines was also the only country the IMF upgraded their GDP growth outlook for 2012. With strong macroeconomic fundamentals amidst global economic uncertainties brought about by the 2008 global financial crisis, the country’s financial sector shows resilience and positive outlook for the years ahead.
The Philippines has a bank-based system with around two-thirds of total system assets owned by banks ranging at PHP 6 trillion worth of assets whereas Philippine GDP stands at PHP 10 trillion. Banks are highly efficient having achieved the lowest record of non-performing loans to total loans in history on August 2012 amounting only to 2.06 percent of total. Outstanding loans currently stands at PHP 3.38 trillion of which PHP 70 billion is non-performing. This NPL was PHP 76.96 billion last year. This declining trend is shown in Table 1. Bank lending for 2012 shoot up faster than economic growth which stood at 14% as shown in Table 2 while GDP was estimated to grow at 7.1%. Loans for production activities accounted for bulk of loans, amounting to P2.860 trillion for the first 11 months of 2012. This shows the upbeat lending of banks to corporations for expansion. Central bank officials said the decline in NPLs and high increase in bank lending showed that banks were keeping prudent credit standards even as they move to lend out more to clients and that there are appetite for lending which is a sign of high bank liquidity. The Philippine banking system remained resilient amid the sovereign and banking crises in Europe and the lackluster global environment. Banks’ core balance sheets were marked by a steady growth in assets, loans, deposit base and capital accounts....
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