Credit Growth in Indonesia: Accelerating in October 2016
Credit growth in Indonesia improved in October 2016 after touching a low in the preceding month. In October credit growth in Indonesia was recorded at a pace of 7.4 percent year-on-year (y/y), reaching IDR 4,246.6 trillion (approx. USD $314.6 billion), accelerating from a growth pace of 6.4 percent (y/y) in September. This development is caused by Bank Indonesia's lower interest rates although the victory of Donald Trump in the 2016 US presidential election may have curtailed demand for credit due to the higher degree of uncertainty about future US political and economic policies.
Growth of working capital credit accelerated to a pace of 5.9 percent (y/y) in October 2016, from 4.1 percent (y/y) in the preceding month, while investment credit rose at a pace of 10.1 percent (y/y) last month from 9.3 percent (y/y) in September. Credit disbursement in the property sector, however, bucked the trend, sliding narrowly from a growth pace of 12.8 percent (y/y) in September to 12.7 percent (y/y) in October.
Rising credit growth implies that companies are engaging in business expansion and investment, while consumers are seeking loans to obtain loans for the purchase of matters such as property, cars and motorcycles. This is important as it boosts Indonesia's macroeconomic growth.
However, most analysts and bankers do not expect to see credit growth rising sharply in Indonesia in the last couple of months of 2016 as there is no significant economic improvement, both on the international and domestic level. Therefore, at the year-end the overall credit growth pace may be around 7 percent (y/y), just within the central bank's target (7 - 9 percent y/y), as privately-held companies remain focused on consolidation rather than seeking business expansion.
Read more: OJK: Pace of Credit Growth in Indonesia Remains Weak
Meanwhile, demand for foreign-denominated loans remains weak as this demand is highly related to export. With Indonesia's export performance still weak, demand therefore falls.
Credit Growth & Disbursement in Indonesia:
| June 2016 |
July 2016 |
Aug. 2016 |
Sept. 2016 |
Oct. 2016 |
|
| Credit Disbursement (in IDR trillion) |
4,193.6 | 4,168.4 | 4,178.6 | 4,243.9 | 4,246.6 |
| Credit Growth (year-on-year) |
8.5% | 7.7% | 6.7% | 6.4% | 7.4% |
Source: Bank Indonesia