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Modest loan growth may dampen Indonesian banking in 2023: Analysts
Analysts project modest loan growth next year for Indonesia's banking industry, citing looming uncertainties and unfavorable conditions stemming from the expected global downturn.
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The BCA Tower stands out against unusually clear skies on Dec. 18, 2016 over the Hotel Indonesia traffic circle on Jl. Thamrin in Jakarta. (kompas.com/Alsadad Rudi)
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odest loan growth is projected for Indonesia in 2023 in contrast to last year’s surge in credit growth, as lenders and borrowers are likely to face tougher conditions stemming from looming global and local uncertainties.
Experts told The Jakarta Post that this year would be challenging for both banks and borrowers as the global economy weakened and the commodities boom subsided. At the same time, many central banks, including Bank Indonesia (BI), were expected to follow the interest rate hikes of the United States Federal Reserve (Fed).
Domestic industries with high reliance on exports were certain to see muted growth, but all sectors were likely to feel the pain from high interest rates that caused an increase in borrowing as well as input costs, partly due to prolonged supply chain disruptions and rupiah depreciation.
Tengfu Li, financial institutions analyst at Moody’s Investors Service, told a virtual press briefing on Dec. 7 that banks would gradually pass on the rate hike to borrowers, which could deter loan access. However, he added that he also expected lenders to keep their rates competitive to remain attractive.
Meanwhile, businesses had started taking a cautious approach toward entering 2023, given the potential uncertainties from a relatively bleak global economic outlook and Indonesia heading into a “political year”.
“We expect loan growth to moderate to 10 percent [year-on-year/yoy],” Li said.
Read also: Expected increase in loan growth points to ongoing recovery
