Philippines Banking & Financial Services Q1 2019
Growth in the Philippine financial services sector for 2018 is expected to be far more subdued in USD terms than thegrowth rates in 2016 and 2017, coming down to around 1.2% from higher rates of around 7.1% and 9% in these previous two years.This is largely because of the mounting headwinds that the Philippine economy has endured over 2018, such as rising inflation, thefall-out from the international trade wars, fears that the economy is overheating and a deteriorating business environment. All havethese have culminated in currency and equity sell-offs for the Philippine peso and stocks. These also mean that the local currencyhas been very weak over 2018, with the benchmark stock index hitting an annual low in October 2018. Despite these negatives, wemaintain a positive overall outlook for the country's banking sector, given that capital and liquidity buffers of the banking sectorremain adequate and well-above regulatory and industry norms. Asset quality also remains healthy, with the non-performing loans(NPL) ratio still well-below crisis levels, even though it has been trending higher gradually since the start of 2018. The country is alsoemerging as a regional cryptocurrency and blockchain hub, with the Phillipine government having established attractive policiesand tax incentives for foreign crytocurrency exchanges to set up shop in one of their Special Economic Zones. Therefore, we expectgrowth in the Philippine financial services sector to pick up over the medium term and average at around 10.8% in USD termsbetween 2019 and 2023.
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