Assessing Corporate Vulnerabilities in Indonesia : A Bottom-Up Default Analysis

Author/Editor:

Jorge A Chan-Lau ; Weimin Miao ; Ken Miyajima ; Jongsoon Shin

Publication Date:

April 26, 2017

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Under adverse macroeconomic conditions, the potential realization of corporate sector vulnerabilities could pose major risks to the economy. This paper assesses corporate vulnerabilities in Indonesia by using a Bottom-Up Default Analysis (BuDA) approach, which allows projecting corporate probabilities of default (PDs) under different macroeconomic scenarios. In particular, a protracted recession and the ensuing currency depreciation could erode buffers on corporate balance sheets, pushing up the probabilities of default (PDs) in the corporate sector to the high levels observed during the Global Financial Crisis. While this is a low-probability scenario, the results suggest the need to closely monitor vulnerabilities and strengthen contingency plans.

Series:

Working Paper No. 17/97

Subject:

English

Publication Date:

April 26, 2017

ISBN/ISSN:

9781475595130/1018-5941

Stock No:

WPIEA2017097

Format:

Paper

Pages:

22

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