The Philippines has plenty of room to expand its private-sector leverage to boost domestic consumption and sustain growth, according a report released by an international banking institution.
In its latest report titled “Asia leverage uncovered,” Standard Chartered Bank said that the Philippines was in the low-risk category in terms of leveraging .
Leverage is the use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
“We place the Philippines in the low-risk category and see room for further leverage. We expect credit growth to remain healthy and well managed in the next few years,” Standard Chartered economist Jeff Ng said in the report.
Ng added that the bank’s view on the risk of over-leveraging in the Philippine economy is modest despite although loan growth has picked up since 2011.
Over-leveraging means incurring a huge debt by borrowing funds at a lower rate of interest and using the excess funds in high risk investments in order to maximize returns.
“Robust economic activity is likely to continue to support loan growth in the medium term, particularly for the corporate sector,” he said.