Indonesia’s Central Bank Pushes Lenders to Cut Rates to Boost Consumption
Bank Indonesia Governor Darmin Nasution told the nation’s commercial lenders to lower borrowing costs as Southeast Asia’s biggest economy looks to domestic consumption to drive growth amid a global slowdown.
“Starting in 2012, all banks must include targets for lending-rate reductions and efficiency improvement in their business plans,” Nasution said in his annual “Bankers Dinner” speech in Jakarta last night. “Inefficiency in commercial banks has contributed to high lending rates.”
Nasution and his board kept the central bank’s reference rate at a record-low 6 percent on Dec. 8 after cutting it 75 basis points over the previous two months, joining neighbors in changing policy direction from combating inflation to shielding economic growth amid Europe’s debt crisis and a U.S. slowdown. Philippine and Malaysian policy makers held interest rates at their last meetings, while Thailand lowered borrowing costs.
“We are optimistic the rate cuts since October will trigger financing from the domestic market, particularly from banks,” Nasution said.
Bank Indonesia forecasts gross domestic product will gain 6.3 percent to 6.7 percent in 2012 from an estimated 6.5 percent this year, driven by investment growth of as much as 10 percent and an increase in private consumption of about 5 percent.
To contact the reporter on this story: Novrida Manurung in Jakarta at nmanurung@bloomberg.net
To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net; Greg Ahlstrand at gahlstrand@bloomberg.net
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