Covid-19 batters Indonesia’s loan growth to over 10-year low

08-Apr-2020 Intellasia | JakartaPost | 6:02 AM Print This Post

Indonesia’s loan growth fell to a more than 10-year low in February as the Covid-19 pandemic hit credit demand across business sectors.

The country’s banking industry recorded a 5.93 percent loan growth in this year’s second month, the lowest expansion since November 2009, according to Financial Services Authority (OJK) data. The figure is lower than 6.1 percent booked in January.

Non-performing loans (NPL) jumped to nearly 2.8 percent, the highest since May last year.

“The slow loan growth was caused by weak demand in line with the economic cycle, which has been slowing since 2019′s fourth quarter, ” said Bank Permata economist Josua Pardede on Thursday.

“Considering that the Covid-19 pandemic will slow down the domestic economy, particularly household spending and private investment, loan growth in 2020 is estimated to continue to be weak, ” he added.

The spread of the coronavirus has forced the government to call on citizens to stay home to contain the disease contagion, causing business disruptions and hitting people’s purchasing power. Official data show that Covid-19 had infected more than 1,986 people with 181 fatalities as of Friday afternoon.

The government projects Indonesia’s economy to grow 2.3 percent this year under the baseline scenario, which would be the lowest rate since 1999, or contract by 0.4 percent in the worst-case scenario as the pandemic batters activity.

Josua said the pandemic had significantly hit six sectors, namely the transportation, warehousing and communication sector, the accommodation, food and beverage sector, wholesale and retail trade, the agriculture, plantation and forestry sector, the mining sector and the processing industry sector.

He projected Indonesia’s loan growth to reach between 4 and 6 percent this year compared to 6.08 percent in 2019. The OJK and Bank Indonesia previously set a loan growth target of around 11 percent this year. The central bank recently slashed its projection to between 6 and 8 percent.


Category: Indonesia

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