As the third largest country in Asia by population and with gross domestic product (GDP) growth forecast to continue at a steady rate of 5%, Indonesia has a lot going in its favour. While there are risks forecasted in the coming year, the international community is looking at how it can capitalise on the country's upward trajectory, and in doing so give the country an economic boost. However, these positives come with concerns over Indonesia's macroeconomic environment. Fitch Ratings' 2019 Outlook: Asia-Pacific Emerging Markets Banks report has revised Indonesia's sector outlook from 'stable' to 'negative' as a result of the rise in interest rates during 2018, with the expectation of a squeeze on bank profits. "In response to the increased US Federal Reserve rates, Indonesia's central bank [has] increased rates [by] 175 basis points since the start of 2018. We're beginning to see that lead to tighter margins, which we expect to continue," says the report. "However, any further rate increases are unlikely to cause too many issues. While they may impact on profits, the banks should be able to manage another increase of up to 50 basis points, in line with Fitch's expectations for Indonesia's rates in 2019."
展开▼
