Indonesia’s government invest heavily in infrastructure, Danamon predicts our economy will grow up to 5.27%

News / 02 February 2018

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Economic growth in Indonesia shows positive trend. If in 2017 Indonesia’s economic growth is around 5.04%, in 2018, Indonesia’s economic growth is predicted to rise up to 5.27%. It is Anton Hendranata, Chief Economist Bank Danamon, who predicts that number in media workshop conomic outlook 2018 this January. In that event, Anton said the economic growth in Indonesia has been affected by some factors, one of them is heavy infrastructure investment from government.  “We already do transformation from government, which is serious number of infrastructure investment and do it consistently. If we can keep the momentum, there is a hope that in 2018 our economic growth can rise up to 5.27%,” said Anton Hendranata.

Indonesia’s government commitment to build infrastructure, according to Anton, is a great first step to fix Indonesia’s economic growth in the future. Why? Because with a great, big, and sufficient infrastructure, Indonesia can get positive point from future investors. Anton said, one of the most important factors for investor to decide whether to invest in a country or not is about that certain country’s infrastructure. If the infrastructure is not sufficient, there is a little chance investor wants to invest. Even though some of them will still invest, the number will be too small. “When King Salman visited Indonesia, Saudi Arabia investment in Indonesia is only one tenth from what they invested in China,” he said.

According to Anton, the Saudi investment decision due to China has much better infrastructure compared to Indonesia. Even though Indonesia and Saudi have similarity in religion, that will not help much. If we talk about money, religion doesn’t matter.“For investor, SARA doesn’t matter. It’s always all about money, whether they can make money or not. If they care about SARA, Saudi Arabia will invest more to us, right? But it didn’t go that way,” said Anton. According to that fact, Anton thinks Jokowi’s government take a great action by invest heavily in infrastructure. Especially if we learn from great country such as US or China, infrastructure is the main thing to improve.

Even though Rupiah exchange rate to US Dollar is predicted to be weak in this 2018, Anton still optimistic that Indonesia’s economy will still grow well. Anton predicts inflation will rise from 3.61% to 3.64%. However, this will not affect Indonesia’s economic growth. Anton also said that Bank Indonesia’s interest rate will be stable in around 4.25%. The interest rate will stay in that level as long as US doesn’t aggressively increase their interest rate. If US aggressively increase their interest rate, there will be huge inflation in Indonesia, and then Rupiah exchange rate to US Dollar will be much lower.

Retail Sector will Trigger 2018 Credit to Grow Double Digit 

PT Bank Danamon Tbk predicts retail sector will trigger 2018 credit to grow from 10 to 11 percent, or around double digit. This was stated by Anton Hendranata in his presentation at media workshop in Menara Bank Danamon at January 31th. This year credit growth, according to Anton, grows because of the escalation of money circulation due to Pemilihan Kepala Daerah (Pilkada) 2018. Anton said, the growth of Indonesian’s citizen number will also make retail sector very important. “Aside from retail sector, transportation and communication are also very interesting,” said Anton. According to data from Danamon, this year credit growth is predicted to be around 7.5 to 7.8 percent. This is because Bank Indonesia’s interest rate which already in 4.25% haven’t followed by credit request yet. “and then non-performing loan is already approach last year 3 percent number. In this number, banks will be very careful,” he said.

Anton explained in detail that the non-performing loan always increase from 2012. If in 2012 the non-performing loan number is around 1.9%, in 2017 the number increase heavily to 2.9%. To reduce non-performing loan number in this 2018, Anton suggest for banks to avoid commodity sector. Last year, commodity sector has really huge non-performing loan ratio. According to Anton, banks should be aware about this data to keep non-performing loan number in check.