Even before the pandemic, private lenders in Asia had predicted that debt services would have imposed a heavier burden. As a result, stimulus policies are needed to support the banking industry through lower interest rates, more flexible liquidity requirements and government-supported programmes to prevent credit risk from becoming too worrying.
However, there are signs of hope for an economic recovery, one of them the election of Joseph Biden as US president that has opened the possibility of a further easing of US-China tension and trade war. The results of clinical trials of several Covid-19 vaccines with efficacy levels of above 90 percent have also spurred hopes that the pandemic will gradually end.In another DBS Bank report entitled “Regional Market Focus: Regional Strategy”, Indonesia's economic growth is predicted to continue to improve on domestic demand and government spending that are key to Indonesia's economic recovery. The total expenditure of the Government of Indonesia in the 2021 State Budget (APBN) is IDR2,750 trillion or 15.6 percent of the Gross Domestic Product, assuming an economic growth of 5 percent. The budget deficit target in the 2021 Stage Budget is set at 5.7 percent, slightly lower than the 2020 deficit of 6.34 percent. Minister of Finance Sri Mulyani said at the “2021 Early Reflection” event that IDR403.9 trillion was allocated for Covid-19 handling and national economic recovery in 2021, up from IDR372.3 trillion. The funds will be used to finance six main programmes, namely health care, social protection, government ministries and institutions, support for micro, small and medium enterprises, corporate financing, and business incentives."With the prospect of better growth in 2021, we believe cyclical recovery and domestic growth will be the main themes next year," said DBS Bank economists in a report published in early December. Bank DBS predicted that Indonesia's economy will grow 4 percent in 2021, lower than the 2021 State Budget projection and Bank Indonesia (BI) (4.8-5.8%).As the political uncertainty in the US has ended and Covid-19 vaccines become available, foreign capital flows to emerging markets, including Indonesia, which have weakened in the last two years, are expected to improve in the coming years. The outlook was also supported by a stable US dollar and Indonesian rupiah. Foreign capital inflows will have a major impact on the JCI, especially on big cap stocks such as banking stocks. "We believe foreign capital inflows will improve the JCI’s performance in 2021," said DBS Bank economists.Meanwhile, BI is likely to keep its benchmark rate low and focus on supporting non-conventional policies. Rupiah bonds are expected to become a new attraction if accompanied by higher offering ratios in auctions so that investors can benefit with the support of the central bank.To ease capital market investors’ worries about a larger budget deficit policy to support the national economy, the Head of the Fiscal Policy Agency (BKF) has confirmed that BI will maintain its role as standby buyer next year to support economic recovery. However, DBS Bank economists predict that BI's participation in absorbing sovereign debt securities will not be as significant as in 2020 thanks to a lower deficit and greater public participation.
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About DBS
DBS is a leading financial services group in Asia with a presence in 18 markets. Headquartered and listed in Singapore, DBS is in the three key Asian axes of growth: Greater China, Southeast Asia and South Asia. The bank's "AA-" and "Aa1" credit ratings are among the highest in the world.
Recognised for its global leadership, DBS has been named “World’s Best Bank” by Euromoney, “Global Bank of the Year” by The Banker and “Best Bank in the World” by Global Finance. The bank is at the forefront of leveraging digital technology to shape the future of banking, having been named “World’s Best Digital Bank” by Euromoney. In addition, DBS has been accorded the “Safest Bank in Asia” award by Global Finance for 12 consecutive years from 2009 to 2020.
DBS provides a full range of services in consumer, SME and corporate banking. As a bank born and bred in Asia, DBS understands the intricacies of doing business in the region’s most dynamic markets. DBS is committed to building lasting relationships with customers, and positively impacting communities through supporting social enterprises, as it banks the Asian way. It has also established a SG50 million foundation to strengthen its corporate social responsibility efforts in Singapore and across Asia.
With its extensive network of operations in Asia and emphasis on engaging and empowering its staff, DBS presents exciting career opportunities. The bank acknowledges the passion, commitment and can-do spirit in all of our 29,000 staff, representing over 40 nationalities. For more information, please visit www.dbs.com.
