Indonesian central bank expects banking credit to slow next year

Indonesia's central bank forecast the country's banking credit to accelerate at slower pace next year due to the effort to stabilize the economy, governor of the bank said here on Thursday. The bank expected the credit to expand slower at 15.5 and 16.3 percent next year from this year's credit growth estimate of 20 percent, said central bank governor Agus Martowardojo. Among the stabilization programs was the effort to keep the country's current account deficit at a favorable level, Martowardojo said at a seminar on economic outlook. The Southeast Asia's largest economy has improved its trade balance as the country registered trade surplus of 132.4 million U. S. dollar in August, against 2.32 billion U.S. dollar deficit in July, the national statistic bureau has said. Beside the programs, the subdued banking credit was also pushed by the high level of interest rate at banking sector, said Martowardojo. In earlier September, the central bank increased its benchmark interest rate for the fourth time since early June by 25 basis points to 7.25 percent to support a depreciating rupiah and cool inflation expectations. Then the bank kept the rate on hold in early October. "With the current higher banks' interest rate, it is going to push the growth of the credit to the range (of 15.5 to 16.3 percent)," Martowardojo. On the level of the credit, he said that it would support the economy to expand at the level of the central bank's target of 5.8 to 6.2 percent next year. "Should the credit grow at a level higher than the target, it may create pressures on the economy," said Martowardojo. The financial authorities have attempted to keep improving the trade balance deficit to support rupiah against the dollar. Indonesia's export account for about 26 percent of the gross- domestic-product (GDP).