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Moral suasion: Authorities urge banks to cut lending rates to boost virus-battered economy
Airlangga projected the country’s economy to expand even slower at 4.7 percent in the first quarter.
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An employee moves packs of bank notes to the cash pool at Bank Mandiri in Jakarta in this undated photo. (The Jakarta Post/Seto Wardhana )
T
he government and financial sector authorities have urged banks to lower their lending rates to encourage business growth amid concerns the COVID-19 outbreak will hit the economy hard.
Government, Bank Indonesia (BI) and Financial Services Authority (OJK) officials met with bank executives on Thursday at the OJK’s headquarters in Jakarta, where the officials called on banks to lower lending rates, especially for small and medium businesses and companies in sectors hit by the novel coronavirus outbreak.
“We hope the transmission of the benchmark interest rate policy will be felt [immediately] by the public,” Coordinating Economic Minister Airlangga Hartarto told reporters after the meeting.
Read also: Coronavirus fears lead to cancellations, postponement of more events at home
The central bank cut its benchmark interest rate, the seven-day reverse repo rate, by 25 basis points (bps) to 4.75 percent last month to mitigate the potential risks of the COVID-19 outbreak on the country’s economic growth. However, economists have said that such a cut would typically be transmitted into lower loan rates in the next three to four months.
President Joko “Jokowi” Widodo announced on Monday the first two confirmed cases of the pneumonia-like illness on home soil, prompting the central bank and the bourse to launch measures to maintain the stability of the financial system as investors dumped Indonesian assets.
BI has announced five measures to stabilize the value of the rupiah against the United States dollar, while the Indonesia Stock Exchange (IDX) halted short selling transactions and prepared other steps for if the stock market fell further in the future.
