• Philippine banks’ asset-quality risks are increasing due to the rising cost of living and higher interest rates, but any deterioration in credit quality is likely to be manageable due to adequate financial buffers of the main borrowers and the robustly growing economy, says Fitch Ratings.
• Large corporate borrowers, which dominate the banking sector’s loan portfolio, are in relatively strong positions to weather higher financing costs. Earnings buffers are more than sufficient to cover the expected increase in interest expenses for the vast majority of debt among listed corporates. A protracted economic slowdown could result in lumpy impairments for many of the banks, given their high single borrowers’ concentration, but this is not our base case. Fitch forecasts the Philippines’ GDP to grow by 5.5% in 2023.