The pace of total bank lending eased a little in August as both businesses and consumers became more wary about taking on debt amid slowing growth.
Banks lent $613.5 billion in August, up just 0.5 per cent from July.
While it is the fourth straight month of increase, it is a more moderate rise than in July, when loans grew 0.6 per cent, and well behind June's 1.6 per cent expansion.
OCBC economist Selena Ling noted that slower growth in lending to business and consumers in August brought average loan growth to 1.9 per cent for the first eight months over the same period last year.
She said: "Given the sluggish growth momentum seen in the third quarter of this year, there is little impetus for credit growth to expand strongly for the remaining months of this year."
Businesses borrowed $373.2 billion in August, up 0.8 per cent from July. Banks lent more to all sectors except manufacturing, which borrowed 3.4 per cent less, and business services, down 0.4 per cent.
Loans to general commerce firms stayed at almost the same level.
The strongest growth in loans was in the transport, storage and communication sector, which borrowed $19.9 billion, up 8 per cent from July.
Credit Suisse economist Michael Wan said the slowing growth in loans reflected the weakening economic outlook, not just in Singapore but also in China, given that it is a big trading partner and a lot of business loans are related to trade financing.
"However, as we move into the next few quarters, there will be some pick-up in growth supported by public policy," he said. "And China, even while it slows, we do not expect it will have a hard landing in 2016, so I don't think loans growth will tip into negative territory, but the risks are quite significant."
Consumer lending hit $240.3 billion in August, up just 0.04 per cent from July as car loans and share financing continued to taper off.
Car loans, which have been declining for over a year, dropped 0.76 per cent to $7.9 billion in August.
Share financing fell 14.7 per cent to $832.7 million amid volatile financial markets. It is the third straight month that share financing has slowed.
Housing and bridging loans grew by a modest 0.2 per cent from July to $182 billion, easing from the 0.7 per cent growth seen from June to July.