BI Revises Banking Credit Growth This Year Is Only 5-7 Percent

JAKARTA - Bank Indonesia (BI) is making corrections to the projected growth in credit and bank financing throughout 2021 from 7-9 percent to 5-7 percent.

BI Governor Perry Warjiyo said that the assumption was based on the intermediary function of the financial sector which had not been strong in the last two months.

"This is reflected in the contraction of credit in January 2021 of 1.92 percent yoy compared to the contraction of 2.41 percent yoy in December 2020," he said in a virtual press conference, Thursday, February 18.

According to Perry, although the resilience of the financial system is maintained, the risk of the continuing impact of COVID-19 on financial system stability is still a threat in itself. Therefore, he said, the central bank would strengthen synergy with the government and the business world to maintain optimism.

"In line with this policy synergy, Bank Indonesia will continue with the accommodative macroprudential policy by loosening credit and financing provisions in the property and automotive sectors to accelerate the recovery of intermediation while still observing the precautionary principle," he explained.

On the same occasion, the monetary authority announced a reduction in the BI 7-Day Reverse Repo Rate (BI7DRR) by 25 basis points to 3.50 percent from 3.75 percent previously. Then, the central bank also sets the Deposit Facility interest rate at 2.75 percent, and the Lending Facility interest rate at 4.25 percent.

To note, throughout 2020 Bank Indonesia has lowered the benchmark interest rate by 125 basis points. Meanwhile, this is the first cut in 2021. So, starting from January 2020 to February 2021, the central bank has lowered interest rates by 150 basis points.