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Full-year bank lending growth 'to exceed target'
The central bank expects bank lending to expand by up to 30 percent by the end of the year, having previously estimated growth at 24 percent
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The central bank expects bank lending to expand by up to 30 percent by the end of the year, having previously estimated growth at 24 percent.
Bank Indonesia (BI) deputy governor Muliaman D. Hadad said over the weekend that high lending demand would come in particular from the agribusiness and trade and industries.
"Lending may grow by between 27 percent and 30 percent (this year). It has not shown any signs of a slowdown (as of July)," Muliaman said.
Year-on-year lending grew 31.6 percent in July to Rp 1,190 trillion (US$131.15 billion), according to BI data.
Last year, banks channeled 25.5 percent more loans than in 2006. As of the end of 2007, total bank lending stood at Rp 1,045.7 trillion.
BI predicts demand for loans from plantation businesses will remain high in the second half of the year as the industry will seek to expand having been boosted by windfall profits from high global market prices, Muliaman said.
Banks typically increase lending in the second half of a year as firms seek funds to materialize their business ventures at the beginning of a year.
Purbaya Yudhi Sadewa, chief researcher of Danareksa Research Institute, and A. Tony Prasetiantono, chief economist at Bank Negara Indonesia (BNI) were also optimistic that lending would increase.
The rise in the BI interest rate to 9 percent in August after four consecutive monthly 25-point increases has prompted banks to raise their lending rates, but that will likely not discourage demand for loans, Purbaya said.
"Lending will still grow, although it may slow a bit as the economy will likely suffer a slowdown in the third and fourth quarters of 2008," he said, adding that a growth of 27 percent to 30 percent -- as estimated by BI -- was well within reach.
Indonesia's economy grew by about 6.3 percent in the first half of 2008, the government estimated. The Central Statistics Agency (BPS) will report the official figure on Aug. 15.
Working capital loans will remain robust in the second half of this year, but consumer loans will likely contract, depending on economic growth.
Purbaya was optimistic the economy would continue to grow as long as BI maintained its benchmark rate below 9.5 percent.
Last year, the economy expanded by 6.3 percent.
Tony also said robust lending growth would likely increase in the second semester, contributing to economic growth.
"The LDR (loan-to-deposit ratio) rate stood at 76 percent at the end of the first semester. That's the highest rate since we suffered the crisis in 1998," Tony said in Magelang, Central Java.
He estimates robust lending growth will continue to positively impact the economy next year.
