SINGAPORE - Moody's Investors Service has changed its outlook for Singapore's banking system to stable from negative, saying the change reflects improving growth conditions and stabilising commodity prices that will limit a further weakening in asset quality and profitability.
The stable outlook is based on Moody's assessment of five drivers: Operating Environment (stable); Asset Quality and Capital (stable); Funding and Liquidity (stable); Profitability and Efficiency (stable); and Systemic Support (stable), according to a release issued on Wednesday (May 31).
"Loan growth will increase mildly but be sustained by the system's strong capital, funding and liquidity buffers," Mr Eugene Tarzimanov, a Moody's vice-president and senior credit officer, said.
"Improving growth momentum in Singapore's key trade partners will support export-oriented manufacturers and offset some lingering weaknesses in the local economy," he added.
Moody's expects real GDP growth in Singapore (Aaa stable) to edge up to 2.2 per cent in 2017 and 2.5 per cent in 2018, from 2 per cent in 2016. Credit growth will also rebound to mid-single digits in this outlook, after almost flat growth in 2016.