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Visitors line up to take the escalator at Plaza Blok M on Feb. 1, 2025. Consumption remains the main driver of Indonesia's economic growth (JP/Nur Janti)
Indonesia's banking sector appears to be recovering, with credit growth returning to double digits in May. Yet beneath the encouraging headline, households face mounting financial pressure as consumer lending slows, layoffs rise, savings decline and purchasing power weakens. The contrast highlights a broader challenge: A banking recovery does not necessarily signal an improvement in the real economy.Credit growth rebounded to 11.51 percent in May 2026, marking a welcome improvement after lending growth had remained in single digits since February 2025 and lagged behind third-party funds (DPK) growth since August 2025. However, the recovery masks a more concerning reality. Consumer credit remains weak, while households continue to save a smaller share of their income amid mounting cost-of-living pressures. Although stronger credit growth is encouraging, persistently weak purchasing power points to structural challenges that cannot be resolved through short-term policy incentives alone.
The Financial Services Authority (OJK) remains optimistic that bank lending will grow by 10 percent this year. Its confidence is supported by the banking sector's strong capital and liquidity positions, as well as the recent rebound in overall lending. The outlook has remained resilient despite Bank Indonesia raising its benchmark interest rate by a cumulative 100 basis points in June to defend the rupiah against further depreciation.
