Indonesia’s loan growth slowed to 8.1% year-on-year in May 2025, down from 8.5% in April and 8.7% in March. According to UOB Kay Hian, this slowdown was primarily due to tight system liquidity, which limited banks’ ability to lend, and a subdued credit appetite from both borrowers and lenders, driven by ongoing macroeconomic uncertainties.
Looking ahead, two key factors could influence lending. UOB Kay Hian economists anticipate further interest rate cuts of 25 basis points in the second half of 2025. UOBKH analyst Posmarito Pakpahan noted that “the weak domestic growth and downward trend in loan growth highlight the need for Bank Indonesia (BI) to actively support liquidity.”
Additionally, accelerated government spending is expected to play a crucial role in stimulating the economy, especially given the slowdown in private consumption and investment. Pakpahan stated, “With the revision in the state budget, we expect government spending to accelerate towards end-25.”
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