The 0.2% drop in March was the smallest decline recorded since the indicator turned negative in June last year.
Singapore’s bank loans fell for the 10th consecutive month with a 0.2% drop in March—although this is the smallest decline in loan growth since the economic bellwether statistic turned negative in June 2020, notes OCBC Treasury Research.
The improvement came thanks to the consumer loans segment expanding 2.1% YoY in March compared to the same month a year earlier, mostly pushed by the housing & bridging loan growing for the fourth straight months, at 1.8% YoY.
However, business loans continued to falter for the 7th straight month, declining 1.5% YoY in March. Whilst loans related to building & construction and business services grew by 5.5% YoY and 3.7% YoY, respectively, they are unable to compensate for the weakness in general commerce (-4.1%), financial institutions (-6.4%), and manufacturing (-4.2%).
Despite continued weakness from the business segment, bank loans continue to improve month-on-month. Loans expanded for the 5th consecutive month with a 0.7% growth in March compared to February, on the back of healthy business and consumer loans.
“This latest bank loans data reinforces the green shoots story in the Singapore economic recovery and it is likely that the overall bank loans data may revert to modest positive on-year growth in the coming months,” said Selena Ling, head, Treasury Research & Strategy, OCBC Treasury Research.
Overall, total bank loans fell 0.7% YoY in Q1 2021, although this is still slightly better than the -0.8% YoY that OCBC Treasury Research forecasted earlier. It is also 2.1% higher than Q1 2019 levels.
Ling forecasts that bank loans with grow 0.3% YoY for the full year, with loans in the second half of the year pulling up the numbers. “Note that domestic business sentiments are gradually improving further going into H2 2021 amid the vaccination progress and talk of more travel bubbles opening up,” she added.