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US tariffs to hit loan growth at local banks
Local banks should tighten stress tests on their loan portfolios, consider temporary loan restructuring for impacted sectors and shift credit growth toward more resilient domestic industries, an analyst urges.
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A customer conducts a transaction at a BTN Syariah branch in this undated photo. (BTN Syariah/-)
B
ank Indonesia (BI) has warned that mounting global uncertainty, including new US import tariffs, could slow loan disbursement growth at domestic banks and prompt them to rethink their strategies for ensuring liquidity.
While some analysts believe the impact will be limited, given the traditionally conservative approach of Indonesian lenders compared to their global counterparts, they see challenges ahead.
In particular, banks facing tight liquidity from slower growth of third-party funds may need to diversify their funding sources, such as by issuing bonds.
BI Governor Perry Warjiyo warned that escalating trade tensions driven by US President Donald Trump's decision to impose so-called “reciprocal” import tariffs on nearly all countries, especially on China, could weigh on global economic growth, including Indonesia's.
As a result, BI expects Indonesia’s economic growth this year to come in "slightly below" 5.1 percent, the midpoint of its 4.7 to 5.5 percent forecast range, mainly due to weaker exports to the US and softer demand from key trading partners, particularly China.
“Policies need to be strengthened to mitigate the impact by boosting domestic demand and seizing new opportunities to increase exports,” Perry said at a press conference on April 23.
He added that the trend could also drag down loan growth at local banks, which BI now forecasts to hit the lower end of its 11-to-13-percent target range this year, amid weaker demand from borrowers.
