2021-09-29-牛津经济研究院-Indonesia_Recovering_demand_to_power_credit_growth_in_2022_4页_214kb

Indonesia Credit Growth Analysis Summary

Current Situation

Credit growth in Indonesia remains subdued due to persistent demand weakness, despite easing lending conditions. Lending standards have normalized, but weak consumer and corporate demand persists, exacerbated by pandemic-related disruptions.

Key Findings

• Lending conditions are easing, but private credit growth is hampered by low demand.
• We expect credit demand to recover in 2022-2023, with private credit growing 12.6% over the period.
• Economic recovery should feed into increased GDP growth through consumption and investment.
• Corporate liabilities and household debt are both below 20% of GDP, providing room for expansion.

Monetary Policy Outlook

Monetary policy is anticipated to remain accommodative in 2022, with bank Indonesia likely to maintain liquidity support. Interest rates may start rising in Q1 2023 after the current easing cycle.

Risks

• Consumer sentiment may remain volatile due to pandemic uncertainties.
• Some sectors, such as utilities, materials, and energy, face debt service capacity constraints.
• Hard-hit sectors like tourism and retail could experience prolonged recovery issues despite low debt levels.

Conclusion

Credit growth is projected to improve as demand strengthens with economic recovery, supporting positive GDP trends by 2022-2023, though risks from sentiment volatility and sector vulnerabilities persist.