Corporate credit picked up further, while MSME and retail growth moderated a bit. After the strong cyclical growth in 2018, TBC Research still expects business credit, and especially corporate, to be moderate at around the same risk appetite.
The recovery of GDP growth in 2017 led to the recovery of inventory buildup with some time lag, and also to a subsequent recovery in investments (excluding the BP project and pubic infrastructure related investments). Thereafter, inventory and investment growth have normalized.
However, business credit continues to grow at above-trend rates. While some one-offs, taxation-related demand, some substitution of FDI-related inflows, and the reclassifications of retail credit into MSME and MSME credit into corporate credit are each somewhat contributing, overall it appears that leverage in the business sector is also increasing.
Together with high growth rates, high dollarization in this segment also contributes to higher debt levels. In addition to the cyclical argument, slower GDP growth going forward and worsened business confidence in Q3 2019 should also play a role.
At the same, the bank business credit and local corporate bonds to GDP trend (with 11% growth of business credit YoY at the moment) indicates that the cyclical recovery in business credit, and especially in corporate credit, may not be yet over. However, as always, this trend should be interpreted with caution.
Overall, the leverage level appears to be acceptable, but there is probably little upside for sustainable high doubledigit growth rates going forward.
However, business credit continues to grow at above-trend rates. While some one-offs, taxation-related demand, some substitution of FDI-related inflows, and the reclassifications of retail credit into MSME and MSME credit into corporate credit are each somewhat contributing, overall it appears that leverage in the business sector is also increasing.
Together with high growth rates, high dollarization in this segment also contributes to higher debt levels. In addition to the cyclical argument, slower GDP growth going forward and worsened business confidence in Q3 2019 should also play a role.
At the same, the bank business credit and local corporate bonds to GDP trend (with 11% growth of business credit YoY at the moment) indicates that the cyclical recovery in business credit, and especially in corporate credit, may not be yet over. However, as always, this trend should be interpreted with caution.
Overall, the leverage level appears to be acceptable, but there is probably little upside for sustainable high doubledigit growth rates going forward.
