Indonesia's loan growth plunges in H1 as COVID-19 pandemic dashes economy

Source: Xinhua| 2020-08-04 17:36:05|Editor: huaxia

JAKARTA, Aug. 4 (Xinhua) -- Indonesia's loan growth tumbled in the first semester this year along with a huge debt restructuring as the novel coronavirus pandemic nearly grounded business activities to a halt.

The Indonesian Financial Services Authority (OJK) on Tuesday said that the loan growth settled at 1.49 percent from January to June, compared with 9.92 percent in the same period of last year.

"We hope this downturn is transient," Head of the OJK's Board of Commissioners Wimboh Santoso said.

Most of the decline occurred in working capital loans followed by those for constructions, the official noted.

The partial lockdown and physical distancing policies applied to rein the novel coronavirus transmission have ravaged business activities across the country.

Consequently, he said, banks have to restructure 784.36 trillion rupiahs (some 53.37 billion U.S. dollars) loans by July 20.

Santoso expected the economy would gradually get back to normalcy along with the reopening of the business activities and relaxation of restrictions which started in June.

"When the economy grows, we hope that the activities of firms would accelerate," he said.

Recently, the government has injected about 2.13 billion U.S. dollar funds in four state banks to help them expand lending and shore up the economy.

As the economy was expected to rebound in the third quarter amid the hope of reliability of the vaccine for COVID-19 for usage early next year, the OJK has forecast that the country's loan growth would creep up by 7 to 9 percent in 2021, picking up from this year's target of 1 to 2 percent.

The Indonesian central bank, Bank Indonesia, has slashed its key rate 100 basis points to 4.00 percent this year. Enditem