Loan growth hits fastest pace since 2014 as credit cycle matures

Corporate loans grew 13.4% whilst consumer loans grew 10.4%.

Loans and advances in Singapore grew 12.5% year-on-year (YoY) in July, accelerating from 11.7% in June and reaching the fastest pace since 2014, according to the Monetary Authority of Singapore's latest monthly statistical bulletin.

According to Nomura, the pickup was broad-based across both corporate and consumer borrowing. Corporate loans rose 13.4% YoY, led by financial services and insurance, manufacturing, general commerce and transport. Consumer loans grew 10.4%, driven by car loans, credit cards and share financing, with mortgages continuing to show steady improvement.

Nomura's financial conditions index for Singapore shows conditions are still supportive of growth despite short-lived tightening episodes earlier in the year.

The credit gap, which measures how far the credit-to-GDP ratio has deviated from its long-term trend, has moved into territory comparable with previous periods of strong economic expansion. Nomura said the credit cycle is entering a more advanced phase.

Liquidity in the banking system is beginning to tighten as a result. The loan-to-deposit ratio rose to 70.3% in July from 67.7% at the end of last year, as deposit growth slowed to 5.3% year-on-year from 7.6% in June. Money supply growth in local currency moderated to 2.7% in July, tracking well below nominal GDP growth of 12.4% in the second quarter.

Nomura expects domestic interest rates to move higher in line with the credit cycle, forecasting core inflation of 2.1% for 2026 on the back of rising energy prices and their knock-on effects across utility costs and food prices.

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