Jakarta – Indonesian President Joko Widodo on Wednesday urged bank executives to help stimulate the economy with cuts in lending rates and loans to small and medium firms, as authorities vowed to support growth after feeble third quarter data.
Southeast Asia's largest economy grew at its weakest pace in over two years with annual growth at 5.02% in July-September, hurt by slackening private consumption and sluggish investment.
Widodo echoed cabinet members in his administration, saying the country should be grateful for above 5% growth rate when other economies are seeing much slower growth or even contraction.
However, the president wants bankers to help the government lift growth further to ward off risks stemming from the U.S.-China trade war, Brexit and a global economic slowdown.
He told banking executives in a conference they should be lending more to small and medium enterprises at a time of slowing growth.
"Don't just finance the big players," Widodo said to applause from his audience. "I repeat, don't just finance the big players and don't just finance the same players." He added, "I will keep notes of those of you who clapped."
Widodo also urged bankers to lower borrowing costs to match the central bank's benchmark rate reduction.
In a statement late on Tuesday, Bank Indonesia (BI) said it would work with the government to maintain economic stability, while continuing efforts to stimulate domestic demand and encourage investment.
The central bank has cut its benchmark interest rates four times since July by a total of 100 basis points (bps), but Widodo said commercial banks had not brought down lending rates as fast and as much as they should have.
At the banking conference, Vice Finance Minister Suahasil Nazara said the government will use the state budget "counter cyclically" to maintain economic growth momentum.
Nazara acknowledged that weakening GDP growth had hit government revenues, limiting its room to respond to the slowdown.
"But in a depressed situation, we understand that you're asking us to help you to be more efficient. That is why the government is providing various tax incentives," he said. "Please take them."
Nazara did not mention new measures, but the finance ministry has been providing incentives in an effort to win investment from companies moving supply chains out of China to escape higher tariffs amid the Sino-U.S. trade dispute.
Earlier this week, Finance Minister Sri Mulyani Indrawati forecast a fiscal deficit of 2% of GDP for 2019, wider than the 1.84% originally penciled, due to pressure on state income. Officials at her office had said a further swelling to up to 2.2% may be tolerated. ($1 = 14,000 rupiah)
[Reporting by Maikel Jefriando; Writing by Gayatri Suroyo; Editing by Clarence Fernandez.]