Indonesia revises down 2020 credit growth to 4 percent

Indonesia’s Financial Services Authority (FSA) has revised the country’s credit growth down to just 4 percent this year compared to 2019 - far from the initial 11 percent.

28, Jul. 2020

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JAKARTA, VNA - Indonesia’s Financial Services Authority (FSA) has revised the country’s credit growth down to just 4 percent this year compared to 2019 - far from the initial 11 percent.

The revision is based on the development of credit realisation over recent months and changes in the business plans of banks.

According to FSA chairman Wimboh Santoso, distribution of credit was hampered by COVID-19 and was reflected in bank credit growth in May, which was only 3.04 percent year-on-year.

Though slowing, he remains optimistic that bank loans will gradually improve and return to normal in the beginning of 2021. He noted that non-performing loans (NPLs) were under control, with a ratio of 2.77 percent.

He was also optimistic that bad loans could be maintained at under 3 percent, in line with the implementation of debt restructuring. Based on FSA data, the capital adequacy ratio as of May remained safe, at 22.14 percent.

The latest Banking Survey conducted by Bank Indonesia pointed out declines in new loan growth in the second quarter of 2020, with the weighted net balance of demand for new loans deteriorating significantly, to -33.9 percent compared with 23.7 percent in the previous period and 78.3 percent in the same period last year. Respondents confirmed the declining growth of all loan types, investment loans in particular.

Survey respondents expect new loan growth to rebound in the third quarter, though not at the rate seen in previous years. They predicted looser lending policies in the third quarter of the year.

Banks expect to ease lending standards on all loan types through credit lines, collateral requirements, and loan maturity. The latest survey also indicates slower credit growth in 2020, at 2.5 percent - much lower than the credit realisation in 2019 of 6.1 percent and the 5.5 percent predicted in the previous survey.- VNA