Potential Economic Growth Observed from the View of Credit Channeling to Priority Sectors

Jan 7 2016
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Financial Services Authority, Jakarta, January 7, 2016: In general, this research aimed to explain about the importance of the roles of banking industry in Indonesia`s economy. The research focused on the impacts of credit channeling to economic sectors considered as priority sectors by government. Data on credit in the priority sectors referred to classifications in Indonesian Banking Statistics (SPI). In relation to the matter, a proxy research has been conducted on Nawacita (nine priorities) program, that is in the fields of: (1) Agriculture; (2) Maritime; (3) Mining Exploration; (4) Construction (representing infrastructure sector); (5) Processing Industry (representing export-oriented products).

Contribution from agriculture and forestry sectors to gross domestic product (GDP) remained low although the sectors employ quite a large number of labors. Meanwhile, potentials in maritime and fisheries have not been harnessed optimally because plenty areas of waters have not been utilized. Contribution from mining sector to economic growth tended to decline since 2010. Apart from that, processing industry gave the biggest contribution to GDP (21.14 percent) but must face the problem of import content in raw materials; therefore their prices will be reasonably expensive, especially when Rupiah exchange rate is depreciated significantly. As for infrastructure investment (construction) in Indonesia, it was still limited, particularly outside Java and Bali islands.

Research results showed that priority sectors that support Nawacita program, especially the five economic sectors mentioned above, have provided qualitative information that is quite significant for economic growth in general. Additionally, credit channeled to the five economic sectors has generally brought positive impacts to regional economic growth in provinces. However, the impacts of credit channeled to processing industry on regional economic growth were still limited to only reach several provinces (West Sumatera, Jambi, West Java, Bali and Sulawesi Barat).

Therefore, it can be concluded that the five sectors have "relative importance" that can describe development in economic growth quite significantly. It is expected that policies made in effort to encourage financing for the five economic sector can be developed further so that banking industry`s contribution to economic growth can be increased. In the end, we hope that this research can give advantages to all parties. Should there be any input or suggestion that may support completion of our research, please submit it to:

Development, Supervision and Crisis Management Department (DPMK), Financial Services Authority.

Industry Profile Analysis Division - Menara Radius Prawiro Tower, 2nd Floor, Bank Indonesia Office Complex, Jalan M.H. Thamrin No. 2, Central Jakarta, Indonesia.

Phone (021) 29600000 ext. 8608 / 8790 / 8083

Email: aslanlubis@ojk.go.id; mirza_yuniar@ojk.go.id; evigayo@ojk.go.id

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