Financial system stability was maintained despite persistent global uncertainty. As an indicator of financial system resilience, the Financial System Stability Index (FSSI) remained in the normal zone throughout the first semester of 2025, underpinned by a resilient banking industry and non-bank financial industry (NBFI) as well as maintained corporate and household performance. Global economic uncertainty resurgence after the announcement of higher reciprocal import tariffs by the United States (US) Government on several advanced and developing economies. Public confidence in financial sector resilience in Indonesia remained strong despite various vulnerabilities and potential shocks. Strong public confidence was supported by the Bank Indonesia policy mix, which remained oriented towards maintaining stability in pursuit of sustainable economic growth in line with the Government's Asta Cita program. In addition, Bank Indonesia continued strengthening policy synergy with the Financial System Stability Committee (KSSK) to maintain financial system stability.
Global economic uncertainty remained high, elevated by the reciprocal import tariffs introduced by the US Administration alongside deepening geopolitical tensions in several regions. Such inauspicious conditions triggered economic moderation in advanced economies, including the US, Europe and Japan, despite authorities in each jurisdiction applying expansionary fiscal policy and accommodative monetary policy. The reciprocal import tariffs are expected to impact world trade performance, particularly through the prospect of weaker demand. In addition, the rebalancing of foreign capital flows from the US to Europe and developing economies, as well as to safe-haven assets, continued in response to a build-up of economic risk in the US, including fiscal risk. Moving forward, vigilance is required alongside a stronger policy response and coordination to mitigate persistently high economic and global financial market uncertainty, while maintaining external resilience, preserving stability and stimulating domestic economic growth.
At home, Indonesia's economy remained resilient with a further opportunity to accelerate growth given the sluggish global economic outlook. National resilience was supported by domestic activity. Investment indicated early signs of recovery, and export maintained growth on the back of global demand for Indonesia's major commodities and manufacturing products. Household consumption posted 4.97% (yoy) growth in line with increasing economic activity and community mobility during the recent series of national religious holidays and school holidays. Meanwhile, US reciprocal import tariffs could potentially trigger trade diversion, thus diverting some exports away from China to Indonesia, particularly in the mining sector, basic metals industry, chemical industry and paper industry, which have strong forward linkages with several countries that have the potential to usurp export share from China. Compelling opportunities to boost growth, therefore, remain available through the positive impact of trade diversion and policy support. Rupiah exchange rate stability was maintained given the strong stabilisation policy response instituted by Bank Indonesia, coupled with renewed enforcement of the Government regulation concerning the Foreign Exchange Proceeds from the Export of Natural Resources (DHE SDA). Inflation was also maintained within the 2.5%±1% target corridor, with volatile food inflation tracking a downward trend as a corollary of inflation control synergy with the Central and Regional Government Inflation Control Teams (TPIP and TPID) through the National Movement for Food Inflation Control (GNPIP) in various regions.
Banking intermediation was maintained despite a further opportunity to accelerate growth in order to support the economy. Growth of loans disbursed by the banking industry in June 2025 recorded 7.77% (yoy) growth, moderating from 12.36% (yoy) in June 2024. The main contributors to credit growth were productive loans, namely investment loans, supported by credit growth in the corporate segment. On the supply side, this was influenced by bank prudence and selective lending, despite third party funds (TPF) growth accelerating to 6.96% (yoy) in June 2025. Faster credit growth than TPF growth prompted the banks to deploy asset reallocation strategies. The banking industry will optimise income and risk (risk-adjusted return) in the asset portfolio by reallocating credit and liquid asset instruments to maximise profitability. Optimising returns and risk management through adjustments to asset portfolio strategies are expected to expand credit. In addition, the prospect of non-TPF funding sources from the domestic and global capital markets increased. Meanwhile, more selective lending appetite was reflected in the Lending Requirement Index (LRI), indicating bank discretion when extending loans.
Banking intermediation was bolstered by positive corporate and household performance, which must be accelerated further. Corporate sales and investment growth helped to maintain the demand for credit. Corporate sales were supported by stronger export sales amid growing pressure on production costs due to the reciprocal import tariffs of the US Government. Nevertheless, the corporate sector tended to delay expansion given persistently high uncertainty. Businesses increased liquidity to provide flexibility when responding to volatile economic dynamics and to help expand financing. In terms of households, household consumption maintained positively growth which supported household credit growth. Positive household credit growth primarily stemmed from housing loans and multipurpose loans, despite moderation. Notwithstanding, policy synergy between the Government and Bank Indonesia successfully offset deeper moderation of housing loan growth. NBFI financing, including online loans, expanded access to finance for households, particularly low-income households, supported by greater adoption of digitalisation that has accelerated services.
Financial system resilience remained solid, underpinned by robust banking industry and NBFI resilience. Credit risk resilience, liquidity and capital in the banking industry remained solid, supported by selective lending to maintain credit quality. The banking industry dealt with challenges, however, in terms of competition to secure funds. Credit risk eased slightly in line with bank efforts to maintain credit quality, except for micro, small and medium enterprises (MSME) loans and consumer loans. Bank profitability continued tracking an upward trend in line with effective efforts to diversify income, correct provisions for impairment losses and enhance operational cost efficiency. Ample liquidity was maintained in the banking industry despite decreasing in line with lower funding liquidity creation as banks increased the servicing of external debt. Financial system resilience also remained solid amid operational risk caused by digitalisation. Strengthening operational and cyber risk mitigation has become a crucial element of maintaining payment system resilience and reliability in Indonesia. Indonesia has strengthened financial system crisis prevention and handling through a comprehensive legal framework. In terms of the NBFI, the resilience of finance companies and online loans was maintained despite increasing risk due to rapid growth of buy now pay later (BNPL) loans, which continues to demand vigilance. Meanwhile, external debt continued a contractionary trend due to declining corporate external debt.
In line with financial sector resilience, corporate and household repayment capacity were maintained in 2025 despite pressures on the household sector, particularly lower-middle income households. Increasing corporate liquidity and fewer businesses experiencing financial distress were indicatives of maintained corporate resilience. Notwithstanding, the impact of global and domestic dynamics along with escalating geopolitical tensions and US reciprocal tariff policy, particularly on exporters, continued to demand vigilance. In terms of households, particularly lower-middle income households, lower incomes and pressures on purchasing power continued to require attention, as indicated by the dominance of informal workers and the ongoing trend of dismissals and redundancies. Lower incomes have slowed household deposit growth and increased non-performing loans (NPL) across all income levels.
MSME loan growth remained positive, supported by small enterprises. By sector, MSME loan growth was primarily driven by the transportation sector, agriculture as well as accommodation. Growth of MSME loans disbursed to those sectors was spurred by the provision of agricultural equipment and machinery as well as agricultural production facilities, increasing MSME export performance and stronger demand among domestic and international travellers during the holiday period. Nevertheless, MSME loan performance moderated in terms of the construction sector, manufacturing industry and trade sector in line with weaker domestic demand. Bank Indonesia remained firmly committed to strengthening inclusive and sustainable national digital and economic transformation through collaboration to organise and host the Indonesia Digital Economy and Finance Festival in synergy with Karya Kreatif Indonesia (FEKDIxKKI) 2024. Green loan disbursements continued tracking an upward trend, accompanied by mitigated credit risk, despite remaining below potential. Meanwhile, financing disbursed by the sharia banking industry must be increased further to support economic growth. Bank Indonesia constantly strengthened its support to optimise inclusive, green and Islamic finance through macroprudential policies targeting the banking industry, alongside MSME, green and sharia empowerment and financing strategies, and the development of an ecosystem to facilitate access to finance, while increasing public education and literacy. Synergy and coordination with financial sector authorities, the Ministry of Finance and other government ministries/agencies were pursued continuously to optimise inclusive, green and Islamic finance from the policy/regulatory side, while providing supporting infrastructure for the financing ecosystem.
Moving forward, banking intermediation in 2025-2026 is forecast to remain solid, supported by a promising domestic economic growth outlook, financial system resilience as well as stable inflation and exchange rates. Credit growth is projected in the 8-11% range in 2025 before accelerating in 2026. On the demand side, the pace of real sector recovery and strengthening public purchasing power are the main driving factors of banking intermediation. On the supply side, improving intermediation will be supported by lower lending rates, adequate liquidity, including additional liquidity from the Macroprudential Liquidity Incentive Policy (KLM), as well as banking industry optimism concerning financial sector resilience. Meanwhile, inclusive (MSME) and green finance are predicted to maintain positive yet moderating growth, supported by the Bank Indonesia policy mix, People's Business Loan (KUR) program, Islamic finance and commitments to a sustainable economic transition, or a just transition. Notwithstanding, several challenges remain, such as the wait-and-see attitude of the corporate sector, weak purchasing power in the middle-lower income bracket, as well as the need to strengthen MSME competitiveness and the sustainability of banking liquidity.
Bank Indonesia continuously strengthens its policy mix by maintaining an accommodative macroprudential policy stance oriented towards expanding credit to the real sector, including inclusive and green finance, in line with the economic and financial cycles. By optimising various macroprudential policy instruments, Bank Indonesia continuously strives to create a stable and inclusive financial system. Pro-growth macroprudential policy is oriented towards strengthening the intermediation function in pursuit of national economic growth. Furthermore, Bank Indonesia strengthened policies to increase foreign funding in the banking industry and ensure greater liquidity management flexibility through the Bank Foreign Funding Ratio (RPLN) and Macroprudential Liquidity Buffer (MPLB) to revive intermediation. In terms of supervision, Bank Indonesia strengthened systemic surveillance through an integrated approach, supported by the development of supervisory technology and application of artificial intelligence (AI) technology. Maintaining financial system stability and effective policy transmission, policy coordination and synergy with financial sector authorities and relevant government ministries/agencies are continuously strengthened through domestic forums and international cooperation.
