Moody's Investors Service has revised its outlook on the Philippine banking system to negative from stable, according to a report by Manila Bulletin. The downgrade reflects the country's sluggish economic growth, which is expected to weigh on banks' asset quality and profitability.
The credit ratings agency cited a challenging operating environment due to persistent inflation, high interest rates, and slower economic expansion. Moody's noted that Philippine banks face rising credit risks, particularly in consumer and corporate lending, as borrowers struggle with higher debt costs.
Moody's expects the Philippine economy to grow at a slower pace than previously anticipated, limiting banks' revenue growth. The negative outlook suggests that Moody's may downgrade the banking system further if economic conditions deteriorate, but could stabilize if growth accelerates and asset quality improves.