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Expected increase in loan growth points to ongoing recovery

Indonesia’s banking industry is poised to book stronger loan growth next year despite a weaker global economic projection and increased risk of recession, reflecting resilience in the domestic economy.

Vincent Fabian Thomas (The Jakarta Post)
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Jakarta
Wed, November 9, 2022

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Expected increase in loan growth points to ongoing recovery Banking industry illustration (Shutterstock/File)

I

ndonesia’s banking industry is poised to book stronger loan growth next year despite a weaker global economic projection and increased risk of recession, reflecting resilience in the domestic economy.

Bank Indonesia (BI) projects loan disbursement will grow between 10 and 12 percent in 2023, marking a slight acceleration from this year’s target of between 9 and 11 percent.

The central bank expects household spending and investment to remain strong next year, which would underpin demand for loans from both consumers and companies.

Higher interest rates would not deter banks from disbursing loans, BI said, as ample liquidity would allow banks to hold back on adjusting their lending rates until well into next year.

“Lending growth will keep increasing, supported by both resilient demand and ample supply of banking liquidity,” BI Governor Perry Warjiyo told reporters during a quarterly press conference of the Financial System Stability Committee (KSSK) on Nov. 3.

Read also: Big RI banks look to further growth despite global tempest

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The Financial Services Authority (OJK) has backed the central bank’s projection. This year’s loan disbursement was likely to hit the upper end of the targeted range at 11 percent, or slightly above it, driven by growth in corporate and working capital loan issuance at a projected 13 and 12 percent respectively, OJK chairman Mahendra Siregar said.

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