Adrian Wail Akhlas, Jakarta – The disbursement of bank loans grew only 6.53 percent year-on-year (yoy) in October, the slowest pace since 2016, according to the Financial Services Authority (OJK).
OJK deputy commissioner for banking supervision Slamet Edy Purnomo said the sluggish growth was due to lower credit demand in the mining and construction sectors.
"Loan growth slowed due to a 4 percent contraction in the mining sector," Slamet said during a press briefing in Jakarta on Friday. He added that lower commodity prices had adversely affected mining companies' financial performances, weakening their credit demand as a result.
The OJK recorded banks' non-performing loan (NPL) had reached 2.73 percent in October from 2.66 percent in September.
"The risk profile in October was still under control [and] the NPL rising is still under control," OJK spokesperson Sekar Putih Djarot said during the same briefing.
The global economic slowdown, driven by Brexit uncertainties and US-China trade frictions, was expected to continue affecting Indonesia's financial market, she added.
"Dovish policies by several central banks in developed countries have had a positive impact on global liquidity, including those of emerging markets, such as Indonesia," she said.
Indonesia's GDP grew 5.02 percent in the third quarter, the slowest in more than two years, as investments and exports plunged. The International Monetary Fund in October projected the country's economy to expand just 5 percent this year – down 0.2 percentage points from its April projection – while the global economy would grow 3 percent, the lowest level since 2009.
Bank Indonesia maintained its seven-day reverse repo rate at 5 percent last week after four interest rate cuts of 100 basis points in total since July. However, the central bank also decided to lower the average primary reserve requirement (GWM) – the minimum amount of bank liquidity held by the central bank – by 50 bps to boost liquidity in the banking system. The new policy will take effect on Jan. 2.
The new policy, according to BI Governor Perry Warjiyo, will free up liquidity of Rp 26 trillion (US$1.84 billion) for banks, with conventional banks receiving additional liquidity of Rp 24.1 trillion and Islamic banks receiving Rp 1.9 trillion.