COVID-19 threatens stability of Indonesia’s financial system hinh anh 1A 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) 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.

Finance Minister Sri Mulyani Indrawati, who serves as the committee’s chair, said on May 11 that the supply-demand shock and lower GDP outlook posed a serious threat to financial system stability.

The nation’s GDP grew by 2.97 percent year-on-year in the first quarter of 2020, the lowest level seen since 2001.

The economy has almost come to a halt following physical distancing measures implemented by businesses and consumers to contain the coronavirus spread. The KSSK expects the economy to grow at 2.3 percent this year, a marked slowdown from 5.02 percent in 2019.

During the first quarter, the country’s financial markets were badly hit as foreign investors sold a net of around 145 trillion Rp (9.72 billion USD) worth of Indonesian assets as they flocked into safe havens. The capital outflow was towering compared to 69.9 trillion Rp recorded during the 2008 global financial crisis and 36 trillion Rp during the taper tantrum period in 2013, the KSSK revealed.

The situation saw the rupiah fall to its lowest level in history at 16,575 Rp per US dollar on March 23, down 15.8 percent from February, according to the committee data. The currency has since recovered 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 of Indonesia (OJK) revealed on May 11 that loan growth in the banking industry amounted to 7.95 percent year on year in the first quarter, higher than the 6.08 percent recorded at the end of last year. However, no new loan demand was recorded in the period, as the growth came from the disbursement of existing credit facilities, OJK chairman Wimboh Santoso said./.