S&P Global reported that credit growth across emerging markets (EMs) in Asia has generally softened in the first six months of the year, except in the Philippines and Vietnam, where lending has notably picked up pace.

According to debt watcher S&P Global, loans from major banks, including universal and commercial banks but excluding investments in the central bank’s reverse repurchase (RRP), grew slightly faster at 11.3 percent in May compared to 11.2 percent in April.

The Bangko Sentral ng Pilipinas (BSP) stated that the faster lending growth was driven by loans to both businesses and individual consumers.

Credit conditions in the region’s emerging markets generally “held up better than expected,” S&P Global said, citing a weaker United States (US) dollar and the “smaller impact” of US President Donald Trump’s tariffs on individual economies’ growth. These conditions have been pulling in capital flows to the EMs, the credit rating agency noted.

These conditions have been attracting capital flows to the EMs, noted the credit rater.

“There are signs of a softening momentum in the private sector’s demand across the region. For a few months now, credit growth across several EM Asian economies has been slowing,” said Vishrut Rana, Asia-Pacific economist at S&P Global Ratings. This trend excludes the Philippines and Vietnam.

According to Rana, it was the “tighter” monetary policy since last year that has been causing a slowdown in the EMs credit growth.

What could help prevent the continued slowdown through the second half of 2025, Rana said, is the “low and stable” inflation in the Asian EMs. This allows central banks to keep lowering policy rates this year “with an eye on weaker private sector growth momentum.”

During its latest policy meeting in June, the policy-setting Monetary Board (MB) had reduced the key borrowing cost by a quarter point to 5.25 percent from 5.5 percent previously. The latest rate cut was prompted by signs of a global economic slowdown due to uncertainty over US trade policy and tensions between Iran and Israel, which have since eased.

To date, the BSP has slashed a cumulative of 1.25 percent from the key policy rate. BSP Governor Eli M. Remolona Jr. said earlier that the MB may reduce rates “twice more” depending on the economic data.

Looking ahead, S&P Global said risks threatening to impact the credit conditions in the EMs will persist. These include “tariffs, uncertainty about US trade policy, further escalation in geopolitical risk, rising long-term government yields, and fiscal challenges across several EMs.”

Meanwhile, it expects the Philippine gross domestic product (GDP) to grow by 5.9 percent this year, matching Vietnam’s pace—the ASEAN region’s best performer. The country’s economy is projected to peak in 2027 at 6.6 percent, before moderating in 2028 at 6.5 percent.

Economic managers have tweaked downwards the GDP target to 5.5 to 6.5 percent from six to 6.5 percent previously due to the increased external uncertainties. They have also narrowed the growth target range for 2026 to 2028 to six percent to seven percent, from the previously more ambitious six percent to eight percent.

Consumer price increases climbed slightly in June to 1.4 percent from May’s five-and-a-half-year low of 1.3 percent. A spike in inflation was tempered by a substantial drop in rice prices, which fell to their lowest in three decades, or since 1995 levels.