Philippine's financial conditions remain stable

Financial stability in the Philippines has not deteriorated even with global volatility. While real interest rates have edged up as inflation has fallen, they have stayed within ranges seen in the past five years. Net portfolio inflows have been near zero in recent months. The Philippines is not immune to short-term outflows when episodic global event risks escalate, however. 

During periods of increased volatility in 2012-14, temporary outflows normalised after a few months. Furthermore, loan growth has been slowing in line with nominal GDP growth, largely due to falling corporate loans. Loan growth in the utilities and construction sectors has been normalising since showing robust growth of 30-40% y/y in 2014, notes Standard Chartered.

Meanwhile, loan growth in the manufacturing and mining sectors remains stable. In contrast, household loan growth has been robust in 2015, coming in at 20.1% y/y in April, after accelerating in 2014. This was partially led by auto loans due to strong motor vehicle sales. According to Standard Chartered, strong household loan growth reflects positive consumer sentiment and healthy domestic household consumption growth. Household loans make up a relatively small proportion (7%) of total loans.