Domestic banks are optimistic that they will achieve 15.7 percent lending growth this year as they are counting on disbursement to the construction sector amid the new government'€™s infrastructure push, according to a central bank survey.

Favorable economic conditions have made banks confident that they will be able to boost loan growth from an annual November growth rate of 11.9 percent, Bank Indonesia (BI) concluded in its 2014 fourth quarter banking survey released on Monday evening.

'€œAn increase in demand for new credit will mainly be seen in the construction sector, in line with more development projects from both the government and the private [sector],'€ the survey highlights. Agriculture, hunting and forestry came in second as the leading lending sector this year.

President Joko '€œJokowi'€ Widodo has put an end to the burdensome and poorly targeted gasoline fuel subsidy and is redirecting billions of US dollars from the subsidies into infrastructure projects, with the Public Works and Public Housing, Transportation and Agriculture ministries seeing their budget allocations being upgraded significantly in the proposed revised 2015 state budget.

Loan growth is expected to be slow in the first quarter before picking up after, as historically demand for loans has always been low in the first months of the year, according to the central bank'€™s survey.

'€œFactors that could hamper loan growth [in 2015] are high-interest rates and credit risks,'€ Bank Indonesia said in the survey, which is based on sampling from 42 Jakarta-based banks that dominate 80 percent of total nationwide loans.

In the first quarter, annual average lending rates would increase by 11 basis points (bps) to 13.6 percent for working capital loans, 16 bps to 13.46 percent for investment loans and 7 bps to 15.61 percent for consumer loans.

BI raised its reference rate by 25 basis points to 7.75 percent in November to ease inflationary pressures from an increase in subsidized-fuel prices.

Bank Mandiri finance and strategy director Pahala Mansury said the lender expected 30 percent lending growth for the infrastructure sector this year as the state-owned bank had a large corporate customer base from both government and private companies.

Pahala estimated Indonesia would need around Rp 5.5 quadrillion (US$435.38 billion) in funds in the next five years to tackle infrastructure bottlenecks that have hindered the largest economy in Southeast Asia from growing to its fullest potential.

'€œThat amount excludes investment by private companies, many of which always expand their facilities in three or four years,'€ he added.

PermataBank president director Roy Arman Arfandy echoed the opinion that infrastructure loans, including in the construction sector, would increase positively this year on account of the government'€™s plans.

As for third-party funds '€” including savings, deposits and current accounts '€” banks are optimistic that growth in the first quarter will remain high.

'€œThe high optimism was supported by an expected increase in interest rates [for funding] in the first quarter of 2015, which could potentially encourage people to save more in banks,'€ BI'€™s survey reads.

• Banks estimate 15.7% average loan growth this year
• Construction to lead demand for loans
• Lending, deposit rates to increase in Q1