Banks expect the economy to remain robust and expand between 6 percent and 7 percent within the next two years despite risks from both the domestic and external fronts.
The upbeat assessment was contained in the results of the Banking Sector Outlook Survey for the first semester of 2019 that was released by the Bangko Sentral ng Pilipinas on Thursday.
“The banking industry remains optimistic on the country’s economic prospect amid global uncertainties and market volatilities… Majority of the BSOS respondents projected the gross domestic product to grow between 6 percent and 7 percent within the next two years,” it said.
The outlook on the Philippine banking system remained stable, with most of the BSOS respondents projecting double-digit growth in assets, loans, deposits and net income.
“The bullish outlook on the banking system indicates that banks will continue to provide an environment conducive to the sustained domestic economic growth,” it said.
Japanese financial giant Nomura also expects the Philippine economy to attain the low-end of its growth forecast of 6 percent to 7 percent this year. It said growth would be stronger at 6.7 percent in 2020 because another budget delay would be unlikely next year.
“Compared to the 2019 budget which suffered a four-month delay and contributed to the growth slowdown in the first half of 2019, every step of this year’s budget approval process in Congress has been done much earlier, consistent with deliberate efforts to avoid a repeat of the 2019 budget delay,” Nomura said in a report Thursday.
Meanwhile, a new section of the BSP survey on financial technology/cybersecurity plans underscored the banking industry’s aptitude on the use of technology-enabled solutions and strong interest in participating in the digital finance ecosystem.
It said this was “expected to add further impetus to the growth and operational efficiency of banks.”
The report noted that most of the banks planning or already employing technology in their operations found its most important application in areas of data security and privacy, know-your-customer procedures and loan scoring. Most of the respondent banks revealed preparedness in managing cybersecurity risks.
Meanwhile, institutional risk was considered as the top concern to the banks’ operation which include cybersecurity threat, regulatory/compliance risk, credit risk and market competition.
Respondent banks considered enhancing their risk management systems to strengthen the banks against potential shocks and external vulnerabilities. They plan to strengthen client relationships and upgrade personnel capabilities.
Banks also recognize the need to keep a high level of risk-based capital and liquidity and strengthen organizational conduct and risk culture to thrive amid the volatility and complexity of the operating environment.
The survey provides insights of bank management on the strategic direction of the industry and emerging risks and trends. This is a part of BSP’s surveillance tools in promoting the resilience of the banking system.