Source : Straits Times - 1 Apr 2009
BANK lending fell in February - the fourth consecutive monthly decline - as loans to businesses slumped amid the financial crisis.
But the rate of decline has again slowed, perhaps indicating that some of the Government’s schemes to make credit available to small businesses are working.
Total Singapore-dollar bank loans in February shrank 0.26 per cent to $270.5 billion from $271.2 billion in January, according to the Monetary Authority of Singapore (MAS) yesterday.
That 0.26 per cent decline may be the key figure. Singdollar loans fell 1 per cent last November from October - the first monthly slide since December 2006 - but the rate of decline has moderated since then.
December’s decline from November was 0.37 per cent, and the rate of decline was lower again in January at 0.33 per cent.
The easier credit flow is likely to be due, in part, to government schemes to tackle the effects of the credit crunch and may herald a pick-up in economic activity.
The January Budget allocated $5.8 billion for a new programme designed to get banks to lend to business. Last November, $2.3 billion was set aside to help businesses ride out the slump.
OCBC Bank economist Selena Ling said yesterday: ‘In the coming months, we could see a turnaround for business loans.’
Other economists are more sceptical about the decline in bank lending and say the worst is far from over.
‘If you look at month-to-month changes for loan growth data, they’re pretty volatile anyway, so you need a couple more data points to make this kind of conclusion,’ said Mr Thomas Kaegi, senior economist at UBS Wealth Management Research.
‘I’m quite bearish on the domestic economy for this year. So far, we’ve seen most of the correction in the export sector and I would expect the domestic sector to start to get worse.’
A United Overseas Bank economist added: ‘Demand for loans looks set to slow as Singapore confronts its worst slowdown this year, and businesses across all sectors will be hit.’
The MAS data showed that while business lending dipped from $156.7 billion in January to $155.8 billion in February, consumer-related loans rose.
Housing and bridging loans - the biggest category of consumer lending - grew from $80.1 billion in January to $80.4 billion in February.
Bankers attribute the rise in housing-related loans to the fact that many of these loans ‘are now being progressively drawn down’ for properties that were for sale during the boom years of 2006 and 2007.
‘These are past loans that are being drawn, and for new mortgages, you’ll find that banks are very shy,’ said Rabobank International general manager Goh Chong Theng.
The drawdowns will accelerate even more next year, he said.
‘You’ll only probably see the effects of the slowdown in mortgage lending in two years’ time,’ Mr Goh added.
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