Bank Indonesia (BI) is expecting Bali's construction sector to show slow growth in Q3 of 2018 despite the fact that several government and private sector infrastructure projects, such as the GWK statue, the Ngurah Rai Airport Underpass and Apron expansions are being completed ahead of next month's IMF-World Bank Annual Meeting in Nusa Dua.

Causa Iman Karana, BI's Representative Head in Bali told local news wires recently, this Q3 slowdown has contributed to a lower investment performance when compared to Q1 (when it grew by more than 7.5 per cent) and in Q2 (when growth reached 6.88 per cent). This slow down he said, was primarily being driven by a slow down of building investments.

BI's recent benchmark interest rate increases may have something to do with this. In June the benchmark interest rate rose by 0.5 basis points to 4.75 per cent, followed by a further increase of 0.25 basis points to 5.5 per cent in August. According to Karana, this could potentially increase bank-lending rates, including mortgage rates.

In an attempt to encourage growth in the construction space, and after an in-depth analysis of prospective borrowers, BI no longer regulates the 'Loan to Value' (LTV) ratio of financing down payments on mortgages, which is now left to the discretion of the banks issuing the loans.

Gapura Bali recently reported Bank Mandiri issuing attractive mortgage interest rates aimed at encouraging growth in construction, offering 5.88 per cent for the first three years, rising to 6.5 per cent for the next five years.

Despite the fact BI is predicting investment performance to show slower growth, it is optimistic Bali's overall economic performance in Q3 of 2018 will continue to accelerate on an annual basis in the range of 6.1 per cent to 6.5 per cent.

This continued growth is being driven by household consumption, foreign exports, tourism (including an increase in MICE activities ahead of the IMF-World Bank Annual Meeting), accommodation, food and beverage outlets, transportation and warehousing.

Source: Antara News, Kumpuran, Kompas, Detik

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