May 3, 2016 edition
Last week, the banking sector began to publicize its first-quarter performance. In fact, some banks already held their annual shareholders' meeting. Although they are still optimistic of improved performance in this year's second half, the poor first-quarter results throw some doubt on whether the banking sector's recovery will actually take place this year.
In January 2016, data showed bank credit growing at just 10 percent from a year ago. With sluggish credit growth, the banks have been aggressively lowering their deposit faster than their loan rates. This explains the rise in the sector's net interest margin (NIM or the difference between deposit and loan interest rates) to 5.6 percent in January this year from 4.2 percent last year. However, this was not enough to cover the rising cost of non-performing loans (NPLs), due to slower economic growth. Sector-wide NPLs rose to 2.7 percent in January this year from 2.4 percent last year, while the sector's profitability dropped 5 percent over the same period. The worry is how far last year's weak growth will extend into 2016.
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More Economy articles in other editions
April 26, 2016 edition
Central banks are impotent and out of ammunition. There is much talk about this ridicule among economists, seeing central bankers' futile efforts to recover optimism and economic growth. No less than Mervyn King, former Bank of England governor, had to admit that sense of powerlessness in his new book The End of Alchemy.
King's confession carries some truth. Various central banks, like those in Europe and Japan, have deployed a myriad of policies-from quantitative easing, which is basically printing money to buy government bonds, to squeezing the interest rates to a negative level. And still, the economy refuses to rise from its stupor.
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April 19, 2016 edition
Early this year, after the lowering of Bank Indonesia's interest rate to 6.75 percent, the rupiah surprisingly strengthened to Rp13,100 per US dollar level from Rp14,000 in December last year. Incoming foreign portfolio funds have helped this trend as it bought our government bonds. This is not surprising, given the 7 percent interest on our government bonds, compared to near zero rates in advanced market bonds. Inflation at home has also been kept at 4.45 percent and the current account deficit at 2 percent of GDP. Still, market players have doubts whether this positive trend will last.
This is because business activity remains weak. For the first few months this year, auto and motorcycle sales have not shown any significant improvement. With exports still sluggish and consumer spending low, the sole driver of economic growth now is government spending. But with tax revenue still below target, there are doubts whether this can be relied on.
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April 12, 2016 edition
Eleven ships owned by Arabikatama Khatulistiwa Fishing Industry (AKFI) sat tied to a dock in Ambon City, Maluku, on Saturday two weeks ago. For more than a year, those ships have sat idle, unable to return to sea. A shortage in raw materials has caused the nearby fish processing factory to discontinue operation as well.
According to Deki and Poli, two security guards working for AKFI, the ships stopped operating following a ban by Marine Affairs and Fisheries Minister Susi Pudjiastuti on cargo transshipment. In response, companies' integrated work system went haywire. The system includes the capture, cold storage, processing and transportation of fish.
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April 5, 2016 edition
The heated debate pitting two powerful ministries on whether the LNG (liquified natural gas) plant of the US$15 billion Masela offshore gas project should be built offshore as a floating LNG facility or built onshore several hundred kilometers away on either Aru or Tanimbar island has finally subsided. Recently, President Jokowi finally decided to side with Coordinating Maritime Minister Rizal Ramli, who argued for an onshore LNG plant as it would have a broader 'multiplier' impact on the region's local economy.
In contrast, the mines and energy ministry agreed with the two project sponsors, INPEX from Japan (with 65 percent interest) and Shell from the Netherlands (with 35 percent), an offshore, floating LNG plant built right next to the gas field would be more cost- and time-efficient. They argued that an offshore option would not require building either a 600- or a 200-kilometer-long pipeline across Indonesia's eastern Arafura sea, depending on which island is chosen. Also, it does not require costly and time consuming land clearings and permits to build an onshore facility.
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March 29, 2016 edition
A verification meeting at the Central Jakarta Commercial Court last Tuesday morning did not provide the relief Said Reza Pahlevy was hoping for.
Said, Pertamina Patra Niaga's director of administration and finance, said he was feeling dejected as negotiations on the postponement of debt payments by Asmin Koalindo Tuhup were not going according to plan.
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March 22, 2016 edition