Indonesian banks' loan growth to hit 10% in 2017

Average lending rates are low compared to historical levels.

BMI Research analysts expect the economy's continued recovery and Bank Indonesia's (BI) accommodative monetary policy stance to bring about an increase in credit uptake over the coming quarters.

"Even though we forecast BI to eventually tighten its benchmark seven-day reverse repo rate by 25bps by the end of 2017, we note that the central bank will try to remain accommodative for as long as possible, and that average lending rates are low compared to historical levels. As delayed infrastructure projects are turned on again and as commodity prices gradually recover, this will likely have a positive impact on risk and credit appetite. Accordingly, we forecast loan growth to come in at 10.0% in 2017, up from 8.8% in 2016," says BMI.