Loan growth sank back into the red in Singapore

Singapore loan growth sank back into the red. After four encouraging months of expansion, growth in overall loans and advances has dipped into negative level again. Latest October loan growth reported a contraction of 0.4% YoY, down from a 0.6% rise in the previous month. 

Business loans have continued to slump. It reported a 2.6% decline, following a 1.0% drop previously. A confluence of factors has perpetrated the weakness. Higher cost of financing, slowdown in the economy, as well as an uncertain business environment are weighing down on business confidence as well as risk appetite of financial institutions. With such factors likely to persist in the coming months, business loan growth is expected to remain weak. 

Though consumer loan growth has been holding up, there have been some signs of softening. Apart from housing loan, all other key categories of consumer loans have been back-pedaling. In fact, even housing loan growth has been persistently, albeit gradually, easing. This essentially reflects a gradual cooling down in the property market. 

Plainly, against the backdrop of a potential interest rate normalisation process in the coming months, loan growth can't possibly be heading to the moon. A low single digit growth will be a blessing.