The euphoria following the release of the second quarter’s economic growth data did not last long as experts and business players have voiced their concerns over the lagging development.

Achieving 5.2 percent full-year growth is going to be an uphill battle, even though the second-quarter data beat many estimates at 5.18 percent. As the euphoria subsided, various economic statistics show that slowdown is still happening in Southeast Asia’s largest economy.

Sluggish global demands of Indonesian products and the government’s own austerity measure are two among several factors that influence the lagging activities.

Bank Indonesia (BI) has even slashed its full-year growth projection to around 4.9 percent to 5.3 percent this year from previous range of 5 percent to 5.4 percent.

BI Governor Agus Martowardojo said financial and agriculture sectors would provide support to the economy for the remainder of the year. However, the financial sector itself is facing additional challenge with slow disbursements and rising bad debts.

Bank loans only grew 8.9 percent on an annual basis throughout the first half, according to data from both Bank Indonesia (BI) and Financial Services Authority (OJK). The rate is lower compared to the 10.4 percent that the banking industry posted just a year ago.

The slow disbursements, including in working capital and investment, reflect sluggish credit demands as corporates are still taking the wait-and-see approach regarding their own expansions, said BI deputy governor Perry Warjiyo.

He added that domestic production capacities were high, but global markets had not called for sufficient demands.

The central bank has issued several policies in an attempt to jack up credit demands, including by replacing the benchmark interest rate and relaxing the loan-to-value (LTV) requirement for mortgage.

The new benchmark now follows the seven-day reverse repurchase (repo) rate at 5.25 percent and no longer uses the 12-month BI rate, currently standing at 6.5 percent.

BI also encourages banks to lend more as it has increased the minimum lending requirement to 80 percent, according to the new loan-to-funding ratio (LFR).

The policies did not immediately trigger banks’ excitement.

Bank Mandiri, the largest bank by asset, has cut its loan growth target to 10 percent and 12 percent this year, down from 12 to 14 percent set previously, as it gets more cautious in disbursing loans amid rising bad loans.

Mandiri’s non-performing loan (NPL) ratio soared to 3.86 percent as of June from 2.43 percent in the same period last year. The increasing NPL might be not very dangerous, but it could hamper credit expansion, said Bank Mandiri chief economist Anton Gunawan.

“Credit growth will probably pick up 1 to 2 percentage point next year compared to this year. Financing for economic activities cannot take off as fast as we’d like,” he said, adding that the situation could adversely affect investment and consumption.

Meanwhile, the largest private lender, Bank Central Asia (BCA), has also projected that it may not see its loans grow to 12 percent as targeted in 2016 if there is no significant economic improvement throughout the rest of the year.

BCA chief economist David Sumual said growth relied on consumption and investment now because trade was still in a negative territory and the government spending was limited.

However, even Investment Coordinating Board (BKPM) head Thomas Lembong said on Tuesday that realization of foreign direct investments (FDI) would rise to 12 percent and 14 percent only by year-end, compared to 19 percent in 2015.

Fedina S. Sundaryani contributed to the story

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