Singapore loan growth may be stuck in the red after dropping to 16-year low

Amid rising interest rates and challenging world economy.

Singapore business and consumer loan growth is poised to remain lacklustre in 2016, according to a report by DBS.

DBS notes that loan growth registered -1.2% YoY in December 2015, crashing to a record low in nearly 16 years. It is also the worst monthly showing since March 2000’s -1.2% YoY.

Business loan growth has also continued to slump, as it dropped 3.7% after a 3% fall previously. This is on back of increased financing costs, the economic slowdown, and the uncertain business landscape weighing down business confidence and risk appetite of financial institutions. As all these factors likely to persist in the coming months, business loan growth will likely stay weak. 

On top of all this, consumer loan growth has moderated to 2.7% YoY, from 2% previously. Though the it has remained positive, it accounts for the bulk of consumer leverages and it has eased to 4.1%, from 4.6% in the previous month. Moreover, DBS posits that waning property costs and and climbing financing costs have likely kept many homebuyers at bay.