Bloomberg News

Indonesia Central Bank Says Growth Solid as Lending Beats Target

September 24, 2011

Sept. 24 (Bloomberg) -- Indonesia’s central bank expects economic growth to remain solid even amid a global slowdown as lending this year may exceed commercial bank expectations, Deputy Governor Muliaman Hadad said in Bandung today.

Loan growth at Indonesian banks will probably rise as much as 25 percent, beating the industry’s 24 percent target, as demand for working capital and investment credit increases, Hadad said. Credit in Southeast Asia’s biggest economy swelled 24.2 percent from a year earlier in August, Bank Indonesia said in a statement on Sept. 8.

Governor Darmin Nasution and his board held benchmark interest rates unchanged for a seventh month in September, as concern the global recovery is faltering prompted policy makers to protect growth. The authority also cut the lower limit for interbank lending rates to 150 basis points less than the central bank’s benchmark rate, from 100 basis points.

“We don’t see an impact from the U.S. and Europe debt crisis making things worse for our commercial banks, though we aren’t closing our eyes to the global turmoil,” Hadad said in a speech. “The problem in global markets need an immediate solution so banks can focus on their intermediary function and support economic growth.”

The central bank has room to cut its benchmark rate if inflation “behaves,” Deputy Governor Hartadi Sarwono said in Jakarta last week. Policy makers are ready to “adjust the rate and mix monetary policy toward loosening” if price gains slow and the economy expands less than expected due to a global slowdown, Perry Warjiyo, the bank’s director of economic research, said last week.

Bank Indonesia forecasts gross domestic product expansion of as much as 6.8 percent this year and possibly 6.7 percent in 2012, after a 6.1 percent pace in 2010. Economic growth in the third quarter may be 6.6 percent, supported by exports, consumption and investment, the central bank said.

--Editors: Jim McDonald, Richard Frost

To contact the reporters on this story: Novrida Manurung in Jakarta at nmanurung@bloomberg.net;

To contact the editor responsible for this story: . at sphang@bloomberg.net


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