Singapore's loan growth dipped to the lowest in almost 16 years

Singapore's loan growth dipped to the lowest in almost 16 years. The latest headline loan growth figure for December2015 registered -1.2% YoY, down from -0.7% in the previous month. This is the third consecutive month of decline in the headline number. This is the worst monthly showing since March 2000 (-1.2% (YoY). The higher interest rates and challenging economic conditions are weighing down on loan numbers. 

The business loan growth has continued to slump. Following a 3.0% drop previously, it sank deeper into the red with a 3.7% decline. A confluence of factors has perpetrated the weakness. Slowdown in the economy ,higher cost of financing, , 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, the business loan growth is expected to remain weak. 

The consumer loan growth has also softened. Loans to consumers moderated to 2.7% YoY, down from 3.0% previously. The main drag came from mortgage loan. Though the number 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. Fall in property prices and higher financing costs probably have kept many potential home buyers at the sidelines. 

Against the backdrop of an interest rate normalisation process and challenging global outlook, risk is that loan growth will remain stuck in the red for many more months to come.