The ironies of Indonesia
Indonesian banks’ lending growth and profits fell in the first half of the year. But that should only be a short-term story. Taking the longer view, the banking sector – like the overall economy – is looking very encouraging.
Certainly that is what international investors have thought this year. They have reaped rich rewards from the stock market, the currency and government bonds, on the back of their growing faith in the stability of the Susilo Bambang Yudhoyono government and its reform drive.
This is despite the fact that the economy has stuttered along at a declining growth rate of barely 5%.
The same dichotomy can be found in the banking sector. Loan growth slowed to 3.75% in the first half – compared with a staggering 24% surge in 2005 – and banks have posted invariably poor results for the period, largely because of rising fuel prices, growing inflation...
