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Declines in loan-to-value ratio not yet significant for credit growth: Expert
Standard Chartered Bankâs head economist Eric Sugandi said on Tuesday declines in the loan-to-value ratio had not yet been significant enough to push forward Indonesiaâs credit growth that is currently being impeded by Bank Indonesiaâs (BI) benchmark interest rate, which remains high
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tandard Chartered Bank's head economist Eric Sugandi said on Tuesday declines in the loan-to-value ratio had not yet been significant enough to push forward Indonesia's credit growth that is currently being impeded by Bank Indonesia's (BI) benchmark interest rate, which remains high.
'I see it [the declining loan-to-value ratio] positively. It's not bad. However, this won't straightaway lead Indonesia's credit growth to increase sharply. This is because credit demands depend on whether there are people who want to get a loan,' he said as quoted by Antara on Tuesday.
The economist was speaking during a collective breaking-of-the-fast event held by the Standard Chartered Bank in Jakarta on Monday evening.
Eric said credit growth would also depend on people's purchasing power. If their purchasing power declined, people would prioritize spending on their primary needs.
He further explained that the central bank's interest rate, which currently stood at 7.5 percent, had also hampered people's purchasing power.
'Even if banks lower their down payments, it is still unlikely for people to take a loan if the interest rate remains high,' said Eric.
He said reducing the loan-to-value ratio would make a good impact in the future, but this would not automatically lead to significant credit growth. Credit would instead grow in stages along with improved economic growth.
The analyst said reducing the loan-to-value ratio would be a positive policy to increase people's consumption.
Eric predicted that this year's credit growth would reach from 12 to 13 percent. 'Thus, there is still hope,' he said. (ebf)(+++)
