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Bank loan growth hampered by interest rate, rising fuel prices

Tempo - September 13, 2022

Arrijal Rachman, Jakarta – Bank Mandiri team of economists estimates that the growth of bank lending in Indonesia in 2022 will not reach double digits, which is mainly due to the impact of inflation and the upward trend in Bank Indonesia (BI) benchmark interest rates.

Bank Mandiri Head of Industry and Regional Research Dendi Ramdani said credit growth in 2022 will only likely reach 9.9 percent. However, this figure is still included in the projected range of bank credit growth made by BI of around 9-11 percent on an annual basis this year.

"We estimate credit growth in 2022 at 9.9 percent," Dendi said in an Industry & Regional Brief, Monday, September 12.

He also said credit growth will be faced with a number of hurdles such as the BI 7-day reverse repo rate reference to 3.75 percent as of August 23 from the previous 3.5 percent.

"And added to the tightened liquidity due to the increase in the Statutory Reserves. The increase in inflation can also be another challenge after the government decides to increase fuel prices which could have an impact on weakening purchasing power," he said.

Bad loans or non-performing loans (NPL) for this type of credit tend to rise slightly. Dendi said that the NPL of productive credit in May 2022 was relatively at the level of 3.5 percent, up slightly from the record in April 2022 of 3.4 percent on an annual basis.

The business, credit to the electricity, gas, and water sectors in all provinces is still contracting, which is down 3.4 percent on an annual basis in May 2022. While the increase is lending to the mining sector in North Maluku, Southeast Sulawesi, and Central Sulawesi, respectively. – grew 29,483.2 percent, 2,211.4 percent and 685.9 percent, respectively.

Source: https://en.tempo.co/read/1633631/bank-loan-growth-hampered-by-interest-rate-rising-fuel-price