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MANILA, Philippines – Despite the onset of the central bank’s rate-hiking cycle, Philippine banks are likely to see some erosion in profitability as the economic fallout from the Middle East conflict weighs on borrowers and raises risks to loan quality, Fitch Ratings said.
In a note, Fitch downgraded its sector outlook on domestic banks to “deteriorating” from “neutral,” citing the Philippines’ vulnerability to higher inflation and weaker economic growth as the war drags on.
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“Weaker domestic demand and tighter policy settings are likely to drive credit deterioration in the region’s more vulnerable markets. In the Philippines, significantly higher inflation is hurting a consumption-led economy,” the debt watcher said.
