Fitch: Indonesia banks face tough

Fitch Ratings said that Indonesian banks' operating conditions are expected to be tougher this year as the domestic economy grapples with the impact of higher costs and weaker purchasing power, despite the strong financial performance of these banks in 2007 and the first quarter of 2008.

The agency said in a new report that while the experience in 2005 to 2006 provides some level of comfort because most of the large Indonesian banks weathered a brief bout of economic weakness well - caution is still warranted given that the worst is probably yet to come.

Fitch said it is expecting real GDP growth for Indonesia to slow to about 6% in 2008 from 6.3% in 2007.

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