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Bank Indonesia (BI), has predicted that bank loans for
infrastructure projects and property development, as well as the
coal-mining, crude palm oil and sugar industries, will drive overall
lending growth this year.
"Those sectors and industries are predicted to shine in 2008 due to
some factors, such as the surge in global oil prices and the decline of
bank interest rates," BI researcher Wimboh Santoso told The Jakarta
Post on Friday.
Bank lending has been following the declining trend of BI's benchmark
interest rates. Since January last year the central bank has cut its
interest rate from 9.5 percent to the current rate of 8 percent to help
spur more lending.
According to Wimboh, the growth of the crude palm oil and coal-mining
industries will be largely boosted by the increase in global oil
prices, while the sugar industry will excel as the world is looking for
alternative means of energy, such as bio-ethanol fuel that is mainly
produced through a sugar fermentation process.
Infrastructure projects, meanwhile, are predicted to expand as the
government plans to focus on the development of infrastructure projects
this year to boost economic activities.
Infrastructure projects are crucial as they will create thousands of
jobs during the development process, and eventually generate massive
multiplier effects for the economy.
Property development, Wimboh said, including housing projects, would
also grow as bank interest rates had shown a declining trend.
Most Indonesians finance the purchase of their homes through bank loans.
Wimboh predicted that in 2008 all the above sectors would help push
bank lending to grow by 24 percent from the previous year of Rp 1,045.7
trillion (US$113.2 billion).
Bank loans grew by 25.5 percent last year, higher than the estimated 22
percent.
Most of the lending went as working capital loans of Rp 533.2 trillion,
about 30 percent higher than the previous year of Rp 414.7 trillion.
By sector, the central bank said most of the lending went to businesses
in the manufacturing, trade and tourism industries.
The manufacturing industry secured Rp 205.6 trillion in loans last
year, increasing 11.7 percent from Rp 184 trillion in 2006; while trade
took Rp 216.9 trillion, rising 32.7 percent from Rp 163.4 trillion.
While credit expansion was robust, it remains prudent as evident in a
decline in non-performing loans in some industry sectors.
Non-performing loans for manufacturing and trade industries in 2007
declined to 7.1 percent and 4.1 percent, from 10.5 percent and 6.2
percent in 2006, respectively.
In total, Wimboh said small and medium enterprises (SMEs) were the main
lending market, with loans to the sector rising by 22.5 percent from Rp
410.4 trillion in 2006 to Rp 502.8 trillion last year.
He predicted lending for SMEs this year would grow by 27 percent.
Last year, non-performing loans for SMEs declined to 3.5 percent, from
4.2 percent in 2006.
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