B

ank loan growth is predicted to stay above 11 percent during the final months of the year, with the country'€™s economy expected to grow at a higher rate, according to Bank Indonesia'€™s (BI) latest assessment.

BI spokesperson Tirta Segara said the central bank was maintaining its prediction that bank loans would stay in the range between 11 and 13 percent year-on-year (yoy) this year, higher than the 10.9 percent yoy and 9.4 percent yoy as of August and July, respectively.

The prediction was based on BI'€™s assessment that the economy would grow between 4.7 and 5.1 percent this year, Tirta said, as investment in cement and heavy equipment industries was starting to pick up, indicating some progress in government projects.

'€œIn accordance with economic activity and the central bank'€™s more relaxed macro-prudential policy, loans will continue to grow to above 11 percent yoy,'€ Tirta said recently.

BI has hinted that it may have room to relax monetary policy, including the possibility of cutting the BI rate from its current 7.5 percent, as challenges in the domestic economy have started to recede following improvements in the rupiah and increased government spending, and despite lingering global uncertainty.

However, Tirta said bank loans would probably not exceed the range of 11 to 13 percent as recent acceleration of state construction projects had yet to trigger multiplier effects in the private sector.

BI'€™s latest banking survey shows dwindling optimism among bankers regarding overall loan growth this year, with average loan growth predictions revised down to 11.9 percent yoy, lower than 12.2 percent yoy in the previous survey.

The Financial Services Authority (OJK) has voiced a similar view that bank loans could reach the upper side of the 11-13 percent range, as some types of credit, such as micro-lending, were on the up, according to OJK chairman Muliaman D. Hadad.

Jerry Ng, president director of Bank Tabungan Pensiunan Nasional (BTPN), said the lender might post 11 percent loan growth yoy to Rp 56.9 trillion as of September as it focused its business on micro and small and medium-sized loans as well as the mass market.

'€œThis shows that loan demand in lower segments remains high despite a challenging economy,'€ Jerry said in a statement on Monday.

National Banks Association (Perbanas) chairman Sigit Pramono said loan growth would always
depend on economic growth, pointing out that '€œthe rule of thumb shows that when the economy grows 4 percent, loans will be able to grow around 12 to 16 percent, while 5 percent economic growth can boost loan increases to around 15 to 20 percent'€.

'€œBased on the government'€™s economic growth target of 5.3 percent, we predict that loans will only be able to grow 12 percent. It'€™s a rather pessimistic and moderate estimate,'€ Sigit said.

Bank Mandiri finance director Kartika '€œTiko'€ Wirjoatmodjo said the lender'€™s loan growth was predicted to stand at 12 percent and would rise to 13 percent in the fourth quarter as credit disbursement for government projects had started to increase.

Bank loan growth, Tito said, would only reach between 14 and 15 percent in the first quarter next year as current demand from real sectors remained weak following widespread decisions to reduce capacity.

'€œWe hope that the government'€™s stimulus packages will trigger new enthusiasm from business owners,'€ Tiko said.