S&P sees growth pick-up for Indonesia in 2018-19
SINGAPORE - Asset quality in Indonesian banks will continue recovering this year, but nonperforming loans (NPLs) in the mining sector remain elevated, S&P Global Ratings said in a report published today. Indonesian banks have also been more cautious in disbursing loans to companies in the riskier segments, primarily those related to commodities, it says.
The report indicates that Indonesia’s GDP growth could pick up slightly to 5.4% in 2018 and to 5.6% in 2019, from 5.1% in 2017. “Stronger commodity prices could translate into a higher contribution of net exports to overall GDP growth.”
S&P says the Indonesian Government's ambitious infrastructure plans could also have a significant multiplier effect on the economy, and the pace of project rollouts could accelerate in the months before the country's 2019 election.
"With the economic turnaround, we expect special mention loans and loan restructuring in Indonesia to start to slow down, with banks being more cautious," said S&P Global Ratings credit analyst, Ivan Tan.
"We expect Indonesian banks' earnings growth to recover in 2018, mainly due to lower credit costs since provisions were largely set aside in 2016."
However, Indonesia's economy is still unable to shake off the commodity drag, S&P says, and commodity-related sectors, especially coal and oil and gas, remain the biggest contributors to NPLs. www.standardandpoors.com (ATI).