Indonesian vehicle sales will rise 25% this year as a result of lower borrowing costs, top retailer PT Astra told the Jakarta Post.

This is over double the company’s initial forecast of 12%, the paper added.

Astra director Priyono Sugiarto told the paper in Jakarta that with lower borrowing costs, national automotive sales would likely increase by 25% to about 400,000 vehicles this year from 318,904 in 2006.

“Domestic vehicle sales stood at 35,000 per month over the last two months on the back of falling lending rates. If the situation remains positive until the end of the year, we’re upbeat the figure could reach 370,000 or 400,000, Suigiarto reportedly told a media conference after the firm’s annual shareholders meeting.

The Jakarta Post noted that, taking the opportunity provided by last month’s lower inflation figures, the central bank once again trimmed its key rate earlier this month, this time to 8.75%, in the hope of spurring higher growth ahead.

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This was the 11th time the bank had cut its key rate since May last year. The central bank’s series of rate cuts is expected to lead to lower lending rates, which in turn will fuel consumer spending on durable and luxury goods, such as cars.

According to figures from the association of the Indonesian automotive industries (Gaikindo), domestic vehicle sales rose by 6% to 84,511 units in the first quarter of this year compared to the figure for the corresponding period last year, the Jakarta Post said.

Astra accounted for 55% of all vehicles sold during the period, a slight decline from 58% in the previous quarter, the paper said.

Astra sells Toyota, Daihatsu, Isuzu, BMW, Peugeot and Nissan Diesel vehicles, and introduced the updated Toyota Vios and Daihatsu Sirion to help boost sales this year.

National automotive sales dropped by 40.3% from 533,922 units to 318,904 last year as a consequence of the sharp increase in interest rates on the back of a double round of fuel price hikes in 2005, the Jakarta Post said.

Astra’s automotive sales declined by 32.5% to 174,827 in 2006 from 258,892 the previous year.