Danamon Optimizes Investment and Financial Strategies Amidst 2024’s Year-End Economic Dynamics

Press Release / 18 December 2024

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Jakarta, 18 December 2024 – PT Bank Danamon Indonesia Tbk (Danamon) introduced a range of investment and financial management strategies aimed at supporting customers in navigating the highly fluctuating economic conditions towards the end of 2024. Backed by data and in-depth analysis, Danamon ensures that every customer's financial decision is not only adaptive to current dynamics but also capable of generating long-term opportunities.

As highlighted in the November 2024 edition of the Indonesia Market Color report, published by the Danamon Economist team, the Indonesian economy posted a year-on-year growth of 4.95% in the third quarter of 2024, slightly below the anticipated 5% projection. According to the report, the slowdown was primarily driven by a decline in household consumption, which contributed only 4.91% to the total Gross Domestic Product (GDP). Household consumption, traditionally the driving force of the Indonesian economy, has fallen below its historical average. This decline is attributed to reduced purchasing power among the population and a rise in the unemployment rate, which has reached 31% annually.

On a global scale, economic dynamics have grown increasingly complex following the results of the United States election, which saw Donald Trump reelected as President. The strengthening of the US dollar, rising U.S. Treasury yields, and increased volatility in international stock markets present additional challenges for developing economies, including Indonesia.

In response to these conditions, Bank Indonesia (BI) implemented strategic measures to safeguard domestic economic stability. Among its measures, BI has extended its macroprudential easing policies, including the relaxation of loan-to-value (LTV) and financing-to-value (FTV) ratios, until the end of 2025 to enhance accessibility to mortgage and vehicle loans. BI is also anticipated to uphold its rupiah stability policy by issuing Bank Indonesia Securities (SRBI), which offers attractive yields.

During the Board of Governors Meeting (BGM) in late November 2024, BI decided to keep the BI7DRR benchmark interest rate at 6% to safeguard the stability of the Rupiah exchange rate amidst rising global uncertainty and financial market volatility. The central bank's priority continues to focus on stabilizing the Rupiah exchange rate in the short term, in light of fluctuating global economic conditions.

At the same time, BI continues to pursue accommodative macroprudential policies to stimulate credit growth, with a particular emphasis on priority sectors such as Micro, Small, and Medium Enterprises (MSMEs) and the green economy. Hosianna Evalita Situmorang, Economist at PT Bank Danamon Indonesia Tbk, stated: “This initiative aims to support economic activities and ensure the sustainable distribution of credit to key sectors of the economy.”

However, she added that the likelihood of further interest rate cuts is becoming increasingly limited. The likelihood of a US interest rate cut has diminished. Earlier in September 2024, it was projected that the Fed would implement a 100 bps interest rate cut across 2024 and 2025, followed by an additional 50 bps cut in 2026. However, as of November 2024, the likelihood of a US interest rate cut has significantly diminished. The Federal Funds Rate (FFR) is projected to reach 4.5% by December 2024, 4% by December 2025, and 3% by December 2026. As the likelihood of further cuts diminishes, Bank Indonesia (BI) may face limited scope for easing its policy. This increases the likelihood of a slower economic recovery in 2025, potentially undermining growth prospects. Therefore, implementing a timely interest rate cut policy by BI will be essential to bolster economic growth and restore consumer confidence.

GOVERNMENT POLICY AND POSITIVE SENTIMENT IN THE DOMESTIC MARKET

The government's initiatives have successfully sustained positive sentiment in the domestic market, as reflected in the high level of consumer confidence in Indonesia's economic conditions. This is evident from the BI Consumer Survey conducted in November 2024, which reported a Consumer Confidence Index (CCI) of 125.9, an increase from 121.1 in the previous month. This rise aligns with the increase in both the current Economic Conditions Index (ECI) and the Consumer Expectations Index (CEI). Furthermore, consumer confidence improved across all categories, with the highest increase observed among respondents earning more than Rp5 million, as well as across all age groups.

Ivan Jaya, Consumer Funding and Wealth Business Head at PT Bank Danamon Indonesia Tbk, noted that these economic challenges also create new investment opportunities. "Short-term fluctuations in the domestic bond market offer investors an opportunity to secure high yields ahead of further interest rate cuts. Indonesia's macroeconomic and fiscal stability continue to be key attractions for investors," he stated.

Danamon also recognized potential in the domestic stock market, which is currently in an oversold condition due to foreign outflow pressures. We believe that the JCI has the potential to rebound in the short term, particularly with the backing of the government's pro-growth policies. This is an opportune moment for investors to accumulate equity mutual funds that focus on large-cap issuers with robust fundamentals, such as BNP Paribas Sri-Kehati and BRI MSCI Indonesia ESG Screened," Ivan added.

To diversify its portfolio, Danamon also provides investment solutions in foreign currency denominations, including products such as BNP Paribas Cakra Syariah USD for the US market and BNP Paribas Greater China Equity Syariah USD for the Asian market. These products offer diversification opportunities with high growth potential in key global markets.

SMART INVESTMENT SOLUTIONS BY DANAMON

Through the D-Bank PRO app, customers can conveniently access a wide range of investment products, including money market mutual funds, fixed income, balanced funds, equities, and index funds. This digital technology simplifies the process for customers to make investment decisions aligned with their risk profiles and financial goals. Customers can also leverage Danamon's Wealth Advisory service for in-depth guidance and insights before making investment decisions. Additionally, they can visit Danamon's official website to access daily and monthly Market Insights curated by the Wealth Management team.

Danamon also supports the community's consumption needs by offering a zero percent down payment policy for mortgages and vehicle loans, providing greater flexibility for customers seeking to fulfill their property and transportation needs. Additionally, Danamon Lebih PRO multicurrency savings enable customers to save, trade, and manage funds in multiple foreign currencies, catering to year-end holiday preparations and other international transaction needs.

As part of its commitment to empowering customers, Danamon reintroduces Danamon Financial Friday (DFF), a mini-series offering the latest financial and investment insights. New episodes of DFF are released monthly on Danamon's official YouTube channel, offering practical guidance on choosing financial products tailored to individual customer needs.

For more information about Danamon's financial insights and solutions, customers can visit Danamon's official channels, including the D-Bank PRO platform and the company's official website. To explore various episodes of Danamon Financial Friday, visit: bdi.co.id/dffplaylist.

Through innovative solutions and cutting-edge technology, Danamon reaffirms its commitment to assisting customers in overcoming challenges and seizing economic opportunities amidst global and domestic dynamics.

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