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Relaxing LTV won’t alleviate impact of BI rate hike: Economists
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Skyscrapers fill Jakarta's cityscape. The capital's residents are refraining from spending amid the current downturn in the rupiah exchange rate. (Tempo/Tony Hartawan)
B
ank Indonesia’s (BI) decision last week to increase its reference rate by 50 basis points (bps) to 5.25 percent will negatively impact economic growth in the second half of 2018, a senior economist has said, although the central also introduced a relaxation policy on the loan to value (LTV) ratio in an attempt to booth the property sector.
“The problem is the low public consumption. The purchasing power is there, but [people] prefer not to spend to anticipate the possibility of the economy worsening,” said Tony Prasetiantono, the head of the economic and public policy school at of Yogyakarta's Gajah Mada University, as kontan.co.id quoted on Monday.
Earlier, Bank Indonesia Governor Perry Warjiyo expressed confidence that the LTV relaxation policy would maintain the momentum of economic recovery.
Tony, however, said relaxing the LTV ratio would not compensate for the 50 bps increase in the BI 7-day reverse repo rate (7DRRR), although the rate hike could help stabilize the rupiah exchange rate.
Bank CIMB Niaga chief economist Adrian Panggabean made a similar comment, saying that the BI rate hike would cost the country its economic growth.
He expressed his doubt that the government could fulfil the economic growth target as set in the state budget. Adrian estimated that economic growth in the second half would be about 5.1 percent.
Meanwhile, the Finance Ministry’s fiscal policy agency head, Suahasil Nazara, supported the BI rate hike, saying that the government would pay attention to its impact on the real sector.
“We will also pay serious attention to the speed of the domestic rate increase in comparison to investment growth,” he added. (bbn)
