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Money Development 05 Oktober 2017
October 05, 2017 08:52

MONEY DEVELOPMENTS: Bouncing back

After showing slower growth in two straight months, broad money or M2 bounced back and expanded at a faster pace in August of 10.0 percent (YoY) compared to July’s growth of 9.5 percent (YoY). Quasi money grew by 9.1 percent (YoY) in August, or faster than the 8.2 percent (YoY) growth in July. By contrast, narrow money or M1 grew at a slower pace of 12.3 percent (YoY) in August vs. 13.0 percent (YoY) in July. As expected, deposits grew moderately by 9.42 percent YoY in August, or little changed from the growth in the previous month of 9.47 percent. Credit growth, meanwhile, remained on its upward trend. It grew by 8 percent YoY in August, or slightly higher than 7.9 percent in the previous month. Consumer loans continued to grow at a brisk pace of 10.21 percent in August (vs. 10.14 percent in July) in line with the improvement in our Consumer Confidence Index (CCI). At the same time, investment loans also grew at a faster pace (+6.85 percent).
Nonetheless, the growth of working capital loans slowed to 7.35 percent from 7.51 percent.

Money Supply: Faster Growth

After showing slower growth in two straight months, broad money or M2 bounced back and expanded at a faster pace in August of 10.0 percent (YoY) compared to July’s growth of 9.5 percent (YoY). By component, the faster pace of M2 growth in August mainly owed to an acceleration in the growth of quasi money. Quasi money - which is 75.2 percent of the total money supply - grew by 9.1 percent (YoY) in August, or faster than the 8.2 percent (YoY) growth in July. By contrast, narrow money or M1 grew at a slower pace of 12.3 percent (YoY) in August vs. 13.0 percent (YoY) in July. Looking at the factors which impact M2 growth, the acceleration of M2 in August was mainly due to the slower growth of government accounts in BI and the banking system (down from 37.7 percent YoY growth in July to 23.4 percent YoY growth in August). In line with this, government bond issuances also declined – down from IDR 89.37 trillion in July to IDR 57.83 trillion in August. In September, money supply is expected to grow at a faster pace supported by higher government expenditures. The move by the central bank to cut its benchmark 7-Day RR rate in September should also give a boost to economic activities. As a result, money supply should also increase.