Heru Kristiyana from OJK warns of the impacts of slow COVID-19 vaccination on Indonesia's economic recovery. (Image via Republika)

If COVID-19 vaccination halted, OJK: Bank credit will be as low as minus 5 percent

If Indonesia's novel coronavirus disease (COVID-19) vaccination program runs slow, the Financial Services Authority (OJK) estimated that the bank credit's growth will experience contraction to minus 5 percent for 2021. The slow vaccination program is an indicator that the COVID-19 pandemic is not well-controlled.

Speaking on Thursday, OJK's Commissioner for Banking Supervision, Heru Kristiyana, stated that the condition might also affect the economy and credit demand. On the other hand, if the COVID-19 vaccination runs smoothly, then the economy will grow around the Q1 of 2021. Heru estimated that the credit growth might reach 7-9 percent. For 2021, Heru stated that OJK set 7.5 percent credit growth.

Meanwhile, the banking player is optimistic that the credit distribution will grow 7.13 percent this year, according to the Bank Business Plan (RBB). Yet, the Bank of Indonesia (BI) predicted that the credit growth will go around 7-9 percent. However, Heru warned that the positive case scenario will only happen if the COVID-19 vaccination runs successfully.

Moreover, Heru also stated that the credit restructuring program to alleviate the debtor affected by the COVID-19 pandemic was the reason behind the decrease in banking profit throughout 2020. OJK recorded on 4 January 2020 that the credit restructuring program totaled Rp971.1 trillion to 7.5 million debtors, including Rp584.45 trillion to over 1,7 million non-micro, small, and medium enterprises (non-UMKM) debtors.

The remaining Rp386.63 trillion was given to over 5.8 million UMKM debtors. Reportedly, the state-owned banks booked a rather displeasing performance last year, as the profit was low. For instance, the profit of PT Bank Mandiri (Persero) Tbk nosedived by 37.71 percent (YoY) from Rp27.48 trillion in 2019 to only Rp17.11 trillion. Then, the net profit of PT Bank Negara Indonesia (Persero) fell by 78.7 percent (YoY) from Rp15.38 trillion in 2019 to only Rp3.28 trillion.

Source: https://bit.ly/3jCeapz