Philippine Banking Outlook Cut to Negative by Moody’s

Moody’s Ratings has downgraded the Philippine banking outlook to negative from stable, citing risks from higher oil prices, inflation pressures and weaker economic momentum linked to geopolitical tensions in the Middle East.

The revised Philippine banking outlook reflects concerns that banks may face slower credit growth and deteriorating asset quality over the coming year.

The ratings agency said rising energy costs and inflation could weaken consumer spending, business confidence and loan demand.

Moody’s also highlighted slower public-investment disbursement related to an ongoing flood-control investigation as an additional headwind for economic activity.

Under the revised Philippine banking outlook, economic growth is expected to slow to between 4% and 4.5% this year.

Higher interest rates and debt-servicing costs may also pressure borrowers, particularly within retail lending portfolios.

Moody’s warned that asset quality could weaken if inflation remains elevated and economic conditions deteriorate further.

Despite the downgrade, the agency said Philippine banks continue to benefit from strong capital levels, healthy profitability, robust liquidity and stable funding positions.