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Central bank's easing gets cool response
Bank Indonesia's (BI) relaxed down payment regulations for vehicle loans and mortgages could be considered a “sweetener” to the economy, but doubts remain as to whether banks will immediately lower their requirements or if the policy will boost car and house sales, which are expected to jack up slower domestic consumption growth
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span>Bank Indonesia's (BI) relaxed down payment regulations for vehicle loans and mortgages could be considered a “sweetener” to the economy, but doubts remain as to whether banks will immediately lower their requirements or if the policy will boost car and house sales, which are expected to jack up slower domestic consumption growth.
The central bank announced on Thursday that it was easing down payment requirements for housing and vehicle loans by 5 to 10 percentage points (ppt) as of Dec. 2. Eco-friendly houses and electric vehicles will get an additional down payment relaxation of 5 ppt.
BI announced its macroprudential policy on top of its decision to lower its benchmark interest rate by 25 basis points (bps) for a third consecutive month this year to boost slowing economic growth.
“We can say that the policy mix is a much needed sweetener for banks and real estate players,” Bank Negara Indonesia (BNI) economist Ryan Kiryanto said in a text message on Thursday. “However, this is not enough. This lavish BI policy needs to be balanced with government accommodative or relaxed fiscal, economy and investment policies as well."
Samuel Sekuritas economist Lana Soelistianingsih expressed doubt that the policy would improve loan disbursements in 2020, adding: “If the economy doesn’t improve, it will slow companies’ performance and in turn make consumers withhold spending."
GDP expanded by 5.05 percent in the second quarter, its lowest in two years. Finance Minister Sri Mulyani Indrawati has lowered the government’s growth expectation for this year to 5.08 percent from the 5.3 percent stated in 2019 state budget as the growth of domestic consumption, which accounts for more than half of Indonesia's economy, was projected to slow to 5 percent from the 5.33 percent initially expected.
Property developers are taking a wait-and-see stance while they gauge the effects of the policy. “It depends on the market,” said Paramount Land marketing director Alvin Andronicus as reported by local media outlet bisnis.com.
Loan growth slowed further to 9.6 percent year-on-year in July — led by weakening consumer loan expansion of just 7.64 percent — after decelerating to a one-year low of 9.9 percent in June.
Meanwhile, national car sales dropped 11.54 percent to 90,403 units in August from the same month last year, according data from the Association of Indonesian Automotive Manufacturers (Gaikindo) compiled by Astra International.
Bank Central Asia president director Jahja Setiaatmadja said the country’s biggest lender in market capitalization would adjust its down payment requirements based on a debtor’s credit profile.
“As long as there’s support from BI [we’ll do it], but the implementation will be based on each bank’s risk appetite,” he told The Jakarta Post on Thursday.
Suparno Djasmin, the director of Astra Financial, a loan consortium under diversified conglomerate PT Astra International, shared the same sentiment, saying that it would also adjust it to each consortium member’s operational ability.
The new rule on housing and vehicle loan down payment is not mandatory for banks as they could adjust it to their risk appetite, BI macroprudential policy department head Juda Agung said on Friday.
He added, however, that the relaxed rule for housing was only applicable to second-time house buyers as the central bank was targeting investors to stimulate the country’s property sector, which had been in a slump for years.
“Investors are the ones who drive the property sector and the prices,” Juda said, adding that the effect of the policy might not become apparent until March, three months after the policy was implemented.
