Credit growth in the Panamanian banking system is expected to slow further in 2009 to around 5% in real terms at the end of the year, Gustavo Villa, economic studies director at local banking regulator SBP, told BNamericas.
The real-term rate of loan growth has decelerated sharply from 18% in 2007 to 10% at end-October.
Further deceleration in credit growth will reflect a combination of factors including a slowdown in the country's economic growth rate, high inflation, more restrictive credit lines, higher borrowing costs and more conservative loan origination standards, said Villa.
Panama, which has historically enjoyed relatively low inflation, saw the annual inflation rate accelerate to 9.5% at the end of October this year from 6.5% in 2007. This is affecting the indebtedness capacity of individuals, for whom it is now more difficult to pay debts and take out new loans, said Villa.
As for economic growth, Panama's GDP growth rate is expected to drop to 6-8% this year after recording 11.2% in 2007.
Recent deceleration of credit growth mainly reflects the fact banks have become much more conservative on lending, especially in consumer loans, which grew at a brisk pace in recent years, according to Villa.
Going forward, deceleration in loan growth would reflect the slowdown in consumer loan growth and also deceleration in growth of commercial lending due to less business activity in the Colón free trade zone, Villa said.
Panamanian banks for their part are trying to maintain at least the current rate of loan growth of 10%, said Mario de Diego, executive VP of banking association ABP.
Panamanian banks reported US$52.7bn in assets and loans of US$31.6bn at October 31, 2008, according to SBP statistics.
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