Indonesia trims rate to boost loan growth

JAKARTA - Bank Indonesia today trimmed the 7-day reverse repo rate by 25bps to 4.75 as the economy continues its sluggish path. ANZ Bank says private consumption has been the sole driver, with investment tepid, especially with public capital expenditure constrained. 

“We are pencilling in a slower H2 growth profile which takes into account the two-speed characteristic of the Indonesian economy,” ANZ says. “Bank Indonesia sees 2016 GDP growth at the lower end of 4.9%-5.3%.”
ANZ says Indonesian banks are wary of extending loans and lowering rates in view of non-performing loans. Credit growth has been tepid, registering growth of 8.8% y/y year-to-date, and Bank Indonesia has revised downwards its 2016 year-end credit growth target to 7-9%, significantly lower than its initial target of 12-14%.
“Non-performing loans have climbed and stand at 3.2% in August compared to an average of 2.57% for the whole of 2015,” ANZ says.  wwww.live.anz.com (ATI).