Money Supply and Loan Growth Continue to Decelerate in September

Economic Research	1 November 2016
Indonesia
Economic Highlights
Money Supply and Loan Growth Continue to Decelerate in September Indonesia’s money supply (M2) growth edged down to 5.1% y-o-y in September, from +7.8% in August due to a slowdown in net domestic and foreign operation. Loans growth also slackened, on account of slower growth in loans extended for working capital, investment and household sector. Deposit growth, likewise, moderated in September. Going forward, we expect demand for private credit to pick up, aided by monetary policy easing and a rebound in economic growth that could induce more household spending and borrowing. Bank Indonesia (BI) board of governors’ meeting decided to cut the BI 7-Day (Reverse) Repo rate to 4.75% on 20th October 2016. For the rest of the year, we expect the BI to retain its policy rate unchanged. Further out, we expect the BI to slash its key policy rate by another 25 basis points in 2017 to support economic growth. Meanwhile, Indonesian rupiah (IDR) continued to appreciate, partly due to unchanged Fed funds rate in September and the successful implementation of the amnesty tax. The IDR, however, is still susceptible to global financial markets even though the selling pressure will unlikely be as severe as last year. As a whole, we expect the IDR to trade toward IDR13,100 in 2016 before weakening to 13,400 by end-2017. Economist:  Rizki Fajar| +6221 2970 7065
To access our recent reports please click on the links below: 21 Oct: BI Unexpectedly Cuts The Key Rate to 4.75% 18 Oct: Exports Continues to Recover while Imports Fall Deeper in September 04 Oct: Money Supply and Loan Growth Decelerate in August 04 Oct: Inflation Picks Up Slightly In September 23 Sep: BI Cuts The Key Rate to 5.00% 15 Sep: Both Exports and Imports Recover in August