JAKARTA. Bank Indonesia (BI) has projected the country’s economic growth would reach 4.9 percent to 5 percent in the second quarter, slightly lower than its previous forecast of 5.1 percent.
BI's economic and monetary policy executive director Juda Agung explained that the central bank’s lower projection was due to sluggish consumption and weak investment, particularly non-building investment.
"Initially, we estimated Indonesia’s economy would grow at a rate slightly above 5 percent in the second quarter. In our latest assessment, we have estimated the economy will grow by between 4.9 to 5 percent,” Juda said in Jakarta on Thursday.
He added that although Indonesia’s economy had recovered, it had not been significant enough to boost the economic growth in the second quarter. "Hence, we estimate that it will grow at a slower rate than we had previously estimated," he added.
In the first quarter, the country's economy only grew 4.92 percent, slower than economic growth in the previous quarter, which stood at 5.04 percent.
In light of these conditions, BI decided to focus on the country’s policy mix at the latestmonthly Board of Governors meeting. In the meeting, the central bank decided to cut its benchmark rate by 25 basis points (bps) from 6.75 percent to 6.50 percent, as well as the deposit facility and lending facility rates to 4.5 percent and 7 percent, respectively.
BI also announced that the bank’s 7-Day (Reverse) Repo rate would be held at 5.25 percent. Consequently, BI’s term structure of monetary operations remains as follows: 5.25 percent for a seven-day tenor, 5.45 percent for a two-week tenor, 5.70 percent for a one-month tenor, 6.10 percent for a three-month tenor, 6.30 percent for a six-month tenor, 6.40 percent for a nine-month tenor and 6.50 percent for a 12-month tenor.
In its macro-prudential policy, BI will relax its loan to value ratio (LTV) on property loans or housing loans (KPR) and apartment ownership loans (KPA) and ease the ownership financing for second and further homes that are still under construction.
In addition, BI also raised the lower limit of the primary reserve requirement's loan financing ratio (GWM-LFR) from 78 percent to 80 percent, leaving the upper limit unchanged at 92 percent.
"The macro-prudential policies are focused on our efforts to boost loans," Juda explained, adding that loan growth contracted in April, only growing by 8 percent. The central bank targeted loans to grow by around 10-12 percent. (Ayomi Amindoni)
