The manufacturing sector will be the main growth driver.
Strong macroeconomic growth in the country will continue to support credit demand. The economy is growing rapidly; Maybank Kim Eng forecasts +6.4% this year and 6.5% in 2018. The growth driver will remain domestic, rather than external demand.
Here's more from Maybank Kim Eng:
Private consumption forms ~70% of GDP and typically experiences high stable growth because of the size and youth of the population. However, it is the growing proportion of investment, which accounts for a high of 28% of GDP, and its multiplier effects that are boosting growth to above-average levels. This will be seen with the government’s drive to push infrastructure spending. Sustained high levels of investments are a major spur to credit demand.
We estimate bank loans will expand at an average of 17% in 2018, nearly at the same pace as our growth assumption of 18% for this year. Production activities are being supported by strong double-digit growth across manufacturing, utilities, wholesale and retail trade as well as real estate activities. These account for 54% of gross loans.
The driver of loan demand has started to shift back to the manufacturing sector, which has been showing continued double-digit growth since Feb 17, much faster than FY15-16. Capacity utilisation has grown up to 83.8%, the highest since 2010. This sector could be a significant growth driver, as it used to account for 16% of total loans five years ago, now down to 12.8%.
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