Total debt for the Philippines is expected to expand by 11 percent next year, S&P Global Ratings said, the second-fastest among Asia Pacific economies.
Credit prospects are better for economies like the Philippines following the easing of market fears that were prominent a year ago, S&P said in its “Asia-Pacific Debt Growth 2018: Slightly Faster Growth, A Touch More Risk” report.
Total Asia-Pacific debt will expand by 8.4 percent to $67.4 trillion in 2018, slightly faster than the estimated 7.5 percent credit growth for 2017, it added.
“This is based on improved borrower and investor sentiment about economic prospects. Our projections put corporate and household debt growth at 10.5 percent and 10 percent, respectively, in 2018 and general government at 5.6 percent,” the debt watcher said.
It explained that the report did not address financial institution debt to avoid double counting since banks and other financial institutions serve as intermediaries to the end-borrowers in the corporate, household and government sectors.
For individual countries, the 11 percent debt growth forecast for the Philippines will be the second-fastest in the region after China’s 13.4 percent.
It noted that in the Philippines, companies will contribute the most to absolute debt accumulation. Households will play a relatively smaller role, coming behind government.
The debt watcher sees general government debt in the Philippines expanding by 9.5 percent in 2018 while corporate debt will grow by 11.5 percent.
“For 2018, the uptrend in credit conditions is likely to continue. We expect global economies to generally pick up and Asia-Pacific countries, especially China, to continue expanding their GDPs (gross domestic product),” S&P Global Ratings credit analyst Terry Chan said in a statement.
“What’s more, the domestic and cross-border financing environment is still favorable–albeit with some tightening–indicating improving credit conditions than those a year ago,” he added.
In a separate report, the credit rater said growth in the region appeared to be picking up on the back of a strengthening global economy and general and higher electronics demand.
It said domestic demand looked stable for the next few years in the Association of Southeast Asian Nations, with the region’s GDP forecast to post steady overall growth of 5.1 percent for 2017 and 2018.
Malaysia, Thailand, and the Philippines are part of the global electronics supply chain and benefited this year from the electronics recovery, S&P said, while Indonesia also gained from higher commodity prices.
For the Philippines, it said GDP growth could settle at 6.6 percent in 2017–an upward revision from an earlier estimate of 6.4 percent. For 2018, Philippine economic growth is seen to slow to 6.5 percent.
“Risks to the outlook include potential capital outflow pressures arising from changes in global monetary conditions and any unexpected slowdown in external demand,” the credit watchdog noted
The Philippine economy expanded by a better-than-expected 6.9 percent in the third quarter. Results for the second quarter were also revised upwards and year-to-date growth, at 6.7 percent, has kept the country on track to hitting the 6.5-7.5 percent target for 2017.