MacroInsight   /   Click here for full PDF version 
 Author(s):   Luthfi Ridho   

• M2 edged-up to +7.6% yoy in May24 (+6.9% yoy in Apr24), mainly from a surge in US$ third party deposit at +10.1% yoy (+4.2% yoy in Apr24).
• BI's open monetary operation grew by +35% yoy in May24 driven mainly by the SRBI at 71% YTD (63% of total OMO)
• We view that the pick-up in money supply growth will be insufficient to promote higher economic growth (c.+4.9% in 2Q24F).

M2 grew higher from US$ third party deposit that linked to SRBI
Broad money supply (M2) rebounded to post higher growth at +7.6% yoy in May24 (+6.9/+7.2% yoy in Apr/Mar24). The higher M2 growth was coming from a rebound in net foreign asset (NFA) at +0.6% yoy (-1.1% yoy in both Apr/Mar24) sourced from higher US$ third party deposit by +10.1% yoy (+4.2% yoy in Apr24). Our discussion with respective officials suggests that the increase in onshore US$ third party deposit was linked to the surge in SRBI by Rp147.5tr to Rp558tr in May24 (Rp410.7tr in Apr24) or 71% YTD (63% of total OMO).
SRBI gained more traction
We think the increasing popularity of SRBI emanates from the high interest rate ranging from 7.1-7.4% for 6-12 months tenor. For comparison, the 10y government bond (SUN) yield is only around 7% currently. Overall, the SRBI absorbs domestic liquidity by Rp61tr/month in avg since its first introduction in Sep23 (see fig.7).
NDA inching-up from more government spending
Meanwhile the net domestic asset (NDA) inched-up to +9.6% yoy in May24 (+9.3% yoy in Apr24), sourced mainly from lower contraction in the net claim to the central government at -3.8% yoy (-6.6% yoy in Apr24) amid higher government spending at +14% yoy (+11% yoy in Apr24), offset by slower growth in private loan at +11.4% yoy (+12.3% yoy in Apr24). However, worth noting that the higher government spending in May24 was for subsidy and fuel compensation payments (+3.7%/+13.2% yoy), which has a minimum multiplier effect to economic activity compared to social aid or other types of spending. Hence, we believe the increase in the government spending in May24 will unlikely have a meaningful impact to economic activity growth.
Private loan decelerated, but mortgage pick-up
Private loan decelerated to +11.4% yoy in May24 (+12.3% yoy in Apr24), mostly due to the lower growth in working capital loan at +10.8% yoy (+12.4% yoy in Apr24). On the contrary, mortgage was picking-up at +8.8% yoy (+7.8%/+7.7% in Apr/Mar24). We believe the property tax incentives of free VAT are starting to have an impact.
Economic growth to be at c.+4.9% yoy in 2Q24
We are on the view that the inched-up money supply growth will unlikely suffice to fuel higher growth in 2Q24. We believe economic activity growth will decelerate to c.+4.9% yoy in 2Q24 vs. +5.1% yoy in 1Q24. Nevertheless, we believe more M2 growth may be created by the new administration via more government spending in the 2H24.


Sumber : IPS