T

he Financial Services Authority (OJK) has brushed off worries over the country'€™s low gross domestic product (GDP) in the first quarter, saying the economy will rebound and banking activities will stay as forecast for the rest of the year.

OJK chairman Muliaman D. Hadad argued that the first quarter'€™s GDP result did not reflect overall economic growth in 2015.

'€œThe result is as we predicted, but we believe the economy will rebound in the second half, supported by higher government spending,'€ he said on Tuesday. The GDP, as announced by the Central Statistics Agency (BPS) on the same day, only grew at an annual pace of 4.7 percent in the first quarter.

Even though many had expected a lower growth rate, the result still came as a surprise because it was a stark contrast to what the country recorded a year ago, with an annual pace of 5.1 percent.

Slow government spending has been cited partly as the reason behind the low result.

OJK commissioner for banking supervision Nelson Tampubolon acknowledged that the outcome might have generated doubts over the full-year economic growth and banking industry'€™s lending expansion.

'€œThe lending figure is still growing compared to December amid ongoing economic slowdown. The year-to-date growth percentage is quite low, less than 2 percent, but banks say that they are ready to disburse more once the economy is more stable,'€ he said.

The OJK had not received any requests from banks to revise their banking business plans, Nelson said, adding that such revision usually occurred in the middle of the year.

According to the plans that were submitted to the OJK in November, the banking industry is looking at an average 16.5 percent growth in lending expansion in 2015, higher than the 11.6 percent achievement in 2014.

The target will translate into around Rp 4.28 quadrillion (US$329.41 billion) in outstanding loans by year-end.

Meanwhile, Bank Central Asia (BCA) president director Jahja Setiaatmadja said that the major lender would stick to its business projection for now, at 12 to 15 percent.

However, he agreed that domestic consumption '€” which has so far been a key driver for the economy '€” would remain a challenge this year.

'€œPeople'€™s buying power is still weak due to price increases,'€ he said, adding that he feared the country would see a higher unemployment rate as a result of the economic slowdown.

Similar to BCA, Bank Negara Indonesia (BNI), another major lender, will keep its target as outlined within its banking business plan, according to president director Achmad Baiquni.

Baiquni said that it eyed 14 percent growth year-on-year (yoy) in its loans for 2015. '€œThey key is in government spending. Robust spending will trigger other activities, including in consumption,'€ he said in a telephone interview.

Separately, HSBC ASEAN economist Su Sian Lim wrote in a research note that credit growth had averaged around 12 percent yoy, well below Bank Indonesia'€™s (BI) range of 15 percent to 17 percent.

 '€œWe think BI will eventually deliver further monetary easing ['€¦] BI might opt to front-load its easing moving to trim its reference rate by 25 bps [basis points] as early as this quarter. Such would take the reference rate to 7.25 percent,'€ she said.