Indonesia’s Growth Is Fueled By A Credit Bubble Record low interest rates have fueled an epic credit and consumption boom in Indonesia, which is no small matter given the fact that domestic consumer spending accounts for nearly 60 percent of the country’s overall $878 billion economy. For the past half-decade, Indonesia’s annual GDP growth rate has averaged about 6 percent – the fastest in Southeast Asia – thanks largely to their consumer spending boom. According to Moody’s, Indonesia’s compound credit loan growth rate has been over 22% for the past six years, while non-mortgage consumer credit nearly tripled in the last five years. During this time, credit card use has greatly proliferated, with the number of credit cards jumping by 60 percent, while the actual value of transactions almost tripled. Fears of a consumer debt crisis forced Bank Indonesia to limit the number of credit cards a single person is allowed to hold, while barring Indonesians who earn less than $330 (USD) a month from being issued credit cards. The chart of loans to Indonesia’s private sector provides a graphical view of Indonesia’s credit bubble:
Posted on: Wed, 16 Oct 2013 07:36:18 +0000
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