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BI SIGNALS RELAXATION IN MACRP-PRUDENTIAL POLICY

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BI Deputy Governor, Dody Budi Waluyo.

Greatindonesia.co.id, Jakarta – To accelerate national economic growth, Bank Indonesia (BI) has signaled that it will soon relax the macro-prudential policy which currently faces low export and investment growth as a result of the global economic downturn.

The support for the macro-prudential policy is aimed at encouraging production and exports from priority sectors such as manufacturing industry and tourism, BI Deputy Governor Dody Budi Waluyo said in Jakarta Monday (12/8/2019).

“From the standpoint of other policies, we still have the macro-prudential policy that we will continue to assess in the future. But I cannot say anything on that now,” he said.

He refused to divulge the details. However, the scope of the BI current policies, either monetary or macro-prudential, will be used to spur the economic growth on condition that the BI target of creating economic stability will not be disrupted.

Since 2018, when BI tightened benchmark interest rate policy, it loosened the macro-prudential policy to compensate the regime of benchmark interest rate hike of up to 1.75 percent to six percent. The policy included the relaxation of property down-payment or loan to value (LtV) and the loosening of the intermediary capability of banks through the macro-prudential intermediary ratio (RIM) increased to the upper limit of up to 94 percent. The policy was also aimed at encouraging the growth of bank credits.

BI also pledged a stimulus to boost the economy through the payment system policy by, among others, developing a technology-based financial industry (fintech) to facilitate transactions and public consumption.

Domestic economic growth should reach between 5.0 and 5.4 percent in 2019, BI has projected. (iaf)

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FINANCE

BI CUTS ITS OUTLOOK FOR LOAN GROWTH TO EIGHT PERCENT

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BI Governor, Perry Warjiyo.

Greatindonesia.co.id, Jakarta – Bank Indonesia (BI) has significantly reduced its outlook for loan growth to eight percent, from the previous range of 10-12 percent.

BI Governor Perry Warjiyo, told a press conference in Jakarta on Thursday (21/11/2019) that the demand for bank credit by November 2019 was still on the decline, even though the liquidity in banks was sufficient.

Therefore, the Central Bank tried to be realistic by cutting 200 basis points (two percent) for the growth outlook of bank credit to eight percent as the realization of credit growth reached 12.1 percent in 2018, the governor remarked.

“The Board of Governors discussed factors affecting credit growth. This is due to the low demand for credit from the corporate side,” he said.

The decline in this projection also cannot be separated from the realization of credit growth until September 2019. In the ninth months of this year, credit growth slowed to 7.89 percent yoy compared to August 2019, when it was 8.59 percent.

The slow growth of credit is in line with third party funds (DPK) in September 2019, which only grew 7.47 percent yoy or slowed down compared to the August 2019 growth of 7.62 percent yoy.

That way, until November 2019, the Central Bank’s latest projections show credit growth in 2019 at eight percent yoy, while third party funds (DPK) grew eight percent yoy.

Regarding the cause of the slow growth of credit, Warjiyo said there was no problem in terms of the supply of banking liquidity. But he acknowledged that in terms of supply, the distribution of liquidity was not evenly distributed in the Commercial Banks Group of Business Activities (BUKU) I, BUKU II, and BUKU III.

He said the slow pace of demand for credit was the main cause for the slow realization of lending.

Some indicators that illustrate the slow pace of credit demand were the Central Bank survey of the business world which concluded that 53 percent of corporate respondents have not planned their investments for 2020 because they are still struggling with company consolidation.

“Another indicator is the decline in imports of capital goods and raw materials. The condition shows that production activities have not grown rapidly,” he said.

In addition, the Central Bank also saw a shift in funding sources. Corporations are now starting to rely heavily on funding sources from the capital market by issuing bonds.

Based on these indicators, BI concluded that credit demand did not yet support the function of banking intermediation.

The projection from BI for credit growth shows the lowest picture for the performance of banking intermediation.

The Financial Services Authority is still setting a credit growth projection at 8-10 percent, based on a presentation during a meeting with the Commission XI on Monday earlier this week.

The Indonesia Deposit Insurance Corporation (LPS) projects that credit growth can still reach 10 percent this year. (ant)

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FINANCE

RUPIAH STRENGTHENS SLIGHTLY FOLLOWING BI INTERVENTION

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Bank Indonesia (BI) intervened in the foreign currency and bond markets through domestic non-deliverable forwards (DNDF) to stabilize the local unit.

Greatindonesia.co.id, Jakarta – The rupiah strengthened slightly against the United States (US) dollar in the Jakarta interbank market Tuesday (8/10/2019) evening following Bank Indonesia’s intervention in the money market. The rupiah rose one point, or 0.01 percent, to Rp14,162 against the dollar compared to Rp14,163 earlier.

Bank Indonesia (BI) intervened in the foreign currency and bond markets through domestic non-deliverable forwards (DNDF) to stabilize the local unit, PT Garuda Berjangka Director Ibrahim Assuaibi said in Jakarta Tuesday (8/10/2019).

“The intervention has successfully prevented the Garuda currency from weakening although Bank Indonesia announced yesterday the country’s foreign exchange reserves which nosedived by US$2.12 billion to $124.32 billion as of late September compared to a month earlier. The drop is the first in the three past months,” he said.

The country’s foreign exchange reserves fell in September 2019 due to the repayment of the government’s foreign debts and the declining placement of foreign currencies by the banking industry in the central bank which has three times lowered its benchmark interest rate since early this year.

The government paid an interest of Rp172.42 trillion from January to August 2019, up 6.25 percent compared to the same period last year.

On the external side, hope for peaceful trade negotiations between the US and China again became the main topic Tuesday. The latest report shows China is more doubtful of reach a wide-ranging trade agreement.

The trade tension between the two countries escalated several days before the talks began when the US reportedly blacklisted eight Chinese technological companies Monday, October 7, on charges of human rights violations against the Muslim minority in Xinjiang province.

The rupiah opened lower in the morning trade at Rp17,175. Throughout the day, it fluctuated between Rp14.137 and Rp14,175 against the dollar. (cam)

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FINANCE

IHSG INDEX CLOSES LOWER OVER FOREX RESERVE PLUNGE

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The IHSG closed, with net foreign buying recorded at Rp144.84 billion.

Greatindonesia.co.id, Jakarta – The Jakarta composite index (IHSG) closed lower on Monday evening due to a dip in Indonesia’s foreign exchange reserves in September 2019.

The index of the Indonesian Stock Exchange (BEI) plummeted 60.67 points, or one percent, to reach 6,000.58, while the index of the 45 most liquid stocks fell 11.6 points, or 1.23 percent, to 931.04.

“The country’s foreign exchange reserves that declined to US$124.3 billion, from US$126.4 billion, spurred investors into profit taking, thereby causing the IHSG to nosedive,” Binaartha Sekuritas analyst M. Nafan Aji Gusta remarked in Jakarta on Monday (7/10/2019).

An hour after opening stronger, the IHSG weakened and remained in the red zone all through the day.

The IHSG closed, with net foreign buying recorded at Rp144.84 billion.

Trade on Monday was recorded, with 445,575 transactions, and 17.22 billion shares, worth Rp7.39 trillion, changing hands. Gainers were outnumbered by decliners, with 131 shares against 272 shares, with 139 shares remaining unchanged.

Regional markets, such as the Nikkei Index, plunged 34.95 points, or 0.16 percent, to 21,375.25, while the Straits Times Index strengthened 21.12 points, or 0.69 percent, to 3,099.48. (cam)

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