THE Philippine banking system is gearing up for robust growth in the next decade, international credit watcher Moody’s Investors Service said on Tuesday, owing largely to the country’s favorable population mix and rising per-capita income.
In its most recent review on Asia-Pacific banks, Moody’s said the Philippine banking system is one of those that are looking to benefit from rapid and divergent demographic changes.
“Over the next decade, of the 17 banking systems in Asia Pacific, banks in Japan, Hong Kong, Korea and Taiwan, in particular, will face challenges from the effects of shrinking prime-age populations and declining proportions of working people,” Moody’s Senior Vice President Christine Kuo said.
“By contrast, banks in India, Indonesia and the Philippines will see growth opportunities in the same period from the effects of rapidly growing prime-age populations and increasing proportions of working people,” Kuo added.
The credit watcher said these countries with favorable demographic trends will benefit banks most when accompanied by income growth and technological advancements.
“Countries where income is growing fast along with prime-age populations while dependency ratios are declining will benefit most from demographic changes. India, Indonesia and the Philippines fit this bill,” Moody’s said.
“For banks in Indonesia and the Philippines, technological advancements will remove a key obstacle to customer acquisitions,” the ratings agency added.
Moody’s expects the Philippines to incur a per-capita GDP (gross domestic product) of around $18,000 by 2030.
For countries with dwindling demographic dividends, the shrinking number of prima-age population is expected to translate to smaller core customer base and will hurt bank profits, a credit-negative development.
“In aging markets, pricing competition among banks will intensify as some banks offer more attractive interest rates or fees to lure new customers from competitors. This will pressure overall profit margins for the sector,” Moody’s said.
In addition, in aging markets, economic growth will slow, which will be detrimental to bank profit, it added.