RHB Indonesia- Economic Highlights: Money Supply and Loan Growth Decelerate in July Unknown Kamis, 01 September 2016




Economic Highlights:
Money Supply and Loan Growth Decelerate in July

¨   Indonesia’s money supply (M2) growth edged down to 8.1% y-o-y in July, from +8.7% in June and +7.6% in May. The decrease was due to a slowdown in net domesticoperation,on account ofslowerloangrowth. This waspartlymitigated bya pick-up in net foreignoperation.

¨   At the same time, total loans growth decreased, on account of slower growth in loans extended for working capital and investment. Deposit growth, on the other hand,accelerated in July, due to faster increases in demand and time deposit.Going forward, we expect demand for private credit to pickup, aided by easing monetary policy and a rebound in economic growth that could induce more household spending and borrowing.
¨   Bank Indonesia (BI) board of governors’ meeting decided to maintain the BI 7-Day (Reverse) Repo rate at5.25% on 19st August 2016 but the lending rate was cut by 100 bps to 6.0% in order to keep a more symmetetrical and narrow interest rate corridor under the new benchmark rate.Nonetheless, we expect BI to cut the new benchmark 7-Day (Reverse) Repo rate by another 25bps for the rest of the year.
¨   Meanwhile, Indonesia rupiah (IDR) depreciated of late, mostly due to rising expectation on Fed rate hike in September.Further out, the IDR 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 towardIDR13,400 in 2016.

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Best regards,
Rizki Fajar
Vice President
Economist
PT. RHB Securities Indonesia