COVID-19 threatens stability of Indonesia’s financial system
The Financial System Stability Committee (KSSK) of Indonesia has warned that the COVID-19 pandemic is threatening the stability of the country’s financial system as it causes a supply-demand shock and weakens financial industry and macro-economy.
A officer wearing protective gear checks rupiah banknotes at the Bank Mandiri cash center in Jakarta on March 20 - Illustrative image (Source: jakartapost)
Jakarta (VNA) – The Financial System Stability Committee (KSSK) ofIndonesia has warned that the COVID-19 pandemic is threatening the stability ofthe country’s financial system as it causes a supply-demand shock and weakensfinancial industry and macro-economy.
Finance Minister Sri Mulyani Indrawati, whoserves as the committee’s chair, said on May 11 that the supply-demand shockand lower GDP outlook posed a serious threat to financial system stability.
The nation’s GDP grew by 2.97 percentyear-on-year in the first quarter of 2020, the lowest level seen since 2001.
The economy has almost come to a haltfollowing physical distancing measures implemented by businesses and consumersto contain the coronavirus spread. The KSSK expects the economy to grow at 2.3percent this year, a marked slowdown from 5.02 percent in 2019.
During the first quarter, the country’sfinancial markets were badly hit as foreign investors sold a net of around 145trillion Rp (9.72 billion USD) worth of Indonesian assets as they flocked intosafe havens. The capital outflow was towering compared to 69.9 trillion Rp recordedduring the 2008 global financial crisis and 36 trillion Rp during the tapertantrum period in 2013, the KSSK revealed.
The situation saw the rupiah fall to itslowest level in history at 16,575 Rp per US dollar on March 23, down 15.8percent from February, according to the committee data. The currency has sincerecovered a bit, gaining 10.21 percent as of April 30 compared to late March,as the government issued 4.3 billion USD worth of global bonds in early April.
The Financial Services Authority ofIndonesia (OJK) revealed on May 11 that loan growth in the banking industry amountedto 7.95 percent year on year in the first quarter, higher than the 6.08 percentrecorded at the end of last year. However, no new loan demand was recorded inthe period, as the growth came from the disbursement of existing creditfacilities, OJK chairman Wimboh Santoso said./.
The issuance of corporate bonds in Indonesia will likely decline this year as many companies shelve plans to seek funding because of unfavorable global economic conditions, analysts have said.
Indonesia’s banks and financial companies restructured debts of over 336 trillion rupiah (22.4 billion USD) for 3.88 million clients hit by the COVID-19 as of May 10, according to the Indonesian Financial Services Authority.
Indonesian President Joko Widodo on May 11 stressed three focuses to deal with the COVID-19 pandemic, namely scaling up tests, boosting surveillance on migrant workers who will come back home, and accelerating the production of medical equipment and COVID-19 medicine.
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A officer wearing protective gear checks rupiah banknotes at the Bank Mandiri cash center in Jakarta on March 20 - Illustrative image (Source: jakartapost) 
