Business Loan Growth Slows
Business loans may experience slower growth in the coming months as companies scale back expansion plans and banks take a cautious lending stance amid a more challenging economic environment.
Still, business loans are still expected to be the driver of total loans growth but at a slower phase, compared with the declining household loan growth.
Malaysia Economic 2016 Forcast
World Bank has projected Malaysia’s gross domestic product (GDP) growth to slow to 4.7% in 2015 from 6% last year on a potential slowdown in China’s economy, an impending hike in US interest rate and weak commodity prices.
Japanese investment bank Nomura is of the view that Malaysia’s GDP growth would slow to 5% this year after last year’s 6%, and then slowing further to 4.3% in 2016.
Unsustainable Loan Growth
Strong business loan growth in the last few months may not be a reflection of actual optimism.
Maybank IB Research analyst Desmond Ch’ng said the pick-up in demand for working capital lines may have been driven by initial teething problems with the implementation of the good and services tax (GST) from April 1, which had caused delays in GST refunds. Another possible contributory reason to this faster growth could also be the weakening of the ringgit and the rise in input costs during the period,” he noted.
The weak ringgit is affecting sentiment on current and future prospects. Dun & Bradstreet Malaysia in a release noted that the weak ringgit was going to make things more difficult for businesses.
“As such, we opine that the strength of growth could be a sign of cashflow constraints emanating from a combination of operational bottlenecks from GST refunds and a challenging growth environment rather than a reflection of genuine robust business volume demand growth. This renders the strong loan growth unsustainable,” he said.
October 12, 2015 / /
Categories: loan news