Despite slowing demand, bank credit is predicted to continue to grow positively this year

Reporter: Laurensius Marshall Sautlan Sitanggang | Editor: Herlina Kartika Dewi

KONTAN.CO.ID – JAKARTA. The economic slowdown due to the Covid-19 pandemic is directly proportional to bank lending. Just look, according to data from Bank Indonesia (BI) as of June 2020, bank credit only grew 1% on an annual basis year on year (yoy) to Rp 5,552.6 trillion.

This credit growth slowed down when compared to the previous month which grew by around 2.4% on an annual basis. There are several factors causing the slow credit growth.

According to the Chief Economist of PT Bank Central Asia Tbk (BCA) David Sumual, the credit slowdown was mainly caused by falling demand for credit.

In fact, in terms of bank capacity in extending credit, currently it is still strong, and even liquidity in the market tends to loosen. “In terms of credit demand, it is indeed weak, this may be related to business concerns about the economic situation in the future,” he told Kontan.co.id, Sunday (23/8).

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According to him, credit growth will indeed be choked up until the end of the year. The projection, among others, only grows in the range of 0-3%. However, David said there was no sign that industrial credit growth would decline. This was in line with the abundance of stimulus provided by the government and regulators to stimulate credit.

However, Indonesia is actually better off than neighboring countries in terms of credit. According to data summarized by CEIC, demand for credit in Indonesia is still superior to most countries in the Southeast Asia region.

It is recorded that credit in Indonesia in June 2020 still rose 3.5% yoy, improving from the position in May 2020 which was only 2.8%. This credit growth was better than Vietnam, which fell 8.6% yoy, then the Philippines which fell at minus 13.3% and Singapore which fell 0.5% in the June 2020 period.

However, compared to Malaysia, Taiwan and Thailand, credit growth in Indonesia is still low. The three countries, according to CEIC, still recorded an increase of around 7%.

Chief Economist of PT Bank Tabungan Negara Tbk (BTN) Winang Budoyo said that the current problem of bank credit in Indonesia is from the demand side, not the supply side.

This means that the government and the banking industry need to encourage people’s purchasing power to increase. “Then encourage production and finally goods producers will seek credit from banks,” he explained.

He added that additional stimulus is needed to boost demand because the current banking conditions are considered capable of fulfilling credit capacity.

However, in a situation with the Covid-19 pandemic, of course this is a challenge in itself. This is because economic conditions both at home and abroad are under pressure. Thus, Winang projects, credit can grow in the range of 3% -3.5% by the end of 2020.

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