Gita Rossiana – The growth rate in lending by Indonesian banks fell in June as consumers delayed purchasing high-price items like cars or motorcycles amid fears of rising inflation.
Bank Indonesia said total outstanding loans at the country's 120 commercial banks grew 20.4 percent to Rp 2,953 trillion ($297 billion) at the end of last month compared to a year earlier, slower than 22.2 percent year-on-year growth in March and 21.9 percent in April.
Central bank Deputy Governor Halim Alamsyah said the slack growth mirrored a sluggish national economic performance so far this year.
The central bank says the largest economy in Southeast Asia likely expanded by around 5.9 percent in the second quarter this year, down from 6.02 percent a quarter earlier.
Halim noted that growth in consumer loans, such as credit cards and mortgages, slowed amid fears of rising inflation and higher interest rates.
"Growth in consumer credit was around 18 percent, while investment credit and working capital continues to grow at over 20 percent," Halim said last week.
Bank Indonesia raised its benchmark interest rate by a quarter of a percentage point last month to 6 percent, after it had been held at a record low 5.75 percent since February 2012 to contain rising inflation.
The central bank's June move prompted banks and financing companies to increase interest rates on car loans, which fund at least 70 percent of car purchases in Indonesia.
According to monthly figures, car sales in June reached 103,530 units, growing at 1.7 percent compared to 2012 but down from the 4 percent year-on-year growth in May.
Halim remained optimistic credit growth could reach 22 percent to 24 percent this year, as the economy recovers in the second half, supported by improving exports and rising domestic consumption boosted by election-related spending.
"Investors remain convinced the Indonesian economy cannot drop further," Halim said. In particular, preparations for the elections, which ramp up in the third quarter of 2013, will boost economic growth by around 0.1 to 0.2 percentage points, Halim said.
But some bankers and analysts are less optimistic. Parwati Surjaudaja, president director of Bank OCBC NISP, said expectations of slower economic growth has made lenders revise their lending targets. This year Bank OCBC NISP's loan growth will be less than 30 percent, he said.
Last week the World Bank revised Indonesia's economic growth forecast this year from to 5.9 percent from its 6.2 percent previous estimate. That was lower than Bank Indonesia's median estimate of 6.15 percent and the government's target of 6.3 percent.
"Economic growth will have an impact on inflation, investment and also the growth of banks' performances, both loans growth and bad loans," said Ahmad Erani Yustika, executive director Institute for Development of Economics and Finance.
With the World Bank economic growth expectation revised to 5.9 percent, loan growth is estimated at around 19 percent this year while non-performing loans will rise to 3 percent of total outstanding loans, from 2.3 percent currently, Erani said.
Tony Prasetyantono, an economist from Gadjah Mada University, said declining growth Indonesia's large trading partners such as China and India would impact company exports, and in turn the loans that exporters took from banks.