Stimulus Has Begun to Bring Positive Impacts on Economy

KOMPAS/TOTOK WIJAYANTO

President Joko “Jokowi” Widodo delivers his speech virtually during the commemoration of 2021 National Press Day in Ancol, North Jakarta, on Tuesday (9/2/2021. In his address at the event themed “Rising from the Pandemic, Jakarta as the Gateway to Economic Recovery with the Press as the Accelerator of Change”, the President expressed appreciation for all members of the press who had helped the government in educating the public to be disciplined in adhering to health protocols to prevent the spread of the novel coronavirus.

A number of indicators have indicated an improvement in the domestic economy. Business players hope the government can ensure that a number of stimulus facilities will bring an optimal impact on the acceleration of national economic recovery.

JAKARTA, KOMPAS — A number of stimulus facilities provided by the government, Bank Indonesia and the Financial Services Authority (OJK) since last year have begun to bring a positive impacts on the real sector, albeit it is still limited.

It was among the conclusions obtained from the Kompas Collaboration Forum (KCF) themed "Opportunities and Challenges for the Synergy of the Business and Financial Sector", which was held virtually on Friday (5/3/2021). In addition to the chairman of the OJK, Wimboh Santoso, the discussion was also attended by the president director of Bank Central Asia (BCA), Jahja Setiaatmadja, as well as the chief executive officers (CEOs) and directors of KCF member companies.

It will among others include the relaxation of lending rules to accelerate credit growth.

According to Wimboh, this year the OJK will further issue stimulus to boost economic growth through the financial services sector. It will among others include the relaxation of lending rules to accelerate credit growth. "Whatever OJK has done, the ultimate goal is to accelerate recovery in the financial sector. The survival period in 2020 had passed, even though there was a decline in economic growth," he said.

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The stimulus facilities provided by the OJK, according to Wimboh, have also brought a positive impact on the recovery of the real sector. Even though in the fourth quarter of 2020, the national gross domestic product (GDP) suffered a contraction of 2.19 percent year-on-year (yoy), the economy had begun to show signs of recovery in the second quarter of the year.

KOMPAS/ADI PRINANTYO

Wimboh Santoso

In addition to the extension of the time limit of its loan restructuring facility from March, 2021 to March, 2022, the OJK has also relaxed prudential rules in the form of risk-weighted asset reduction (RWA) such as the reduction of the credit risk weight for credits for vehicles, housing and health services.

The amount of loans in the banking industry, which received the restructuring facility until 8 Feb. 2021, reached Rp 987.48 trillion, which were given to 7.94 million micro, small and medium enterprises (MSMEs) and corporate borrowers. Meanwhile, the number of MSMEs, which benefited the loan restructuring facility, reached 6.15 million borrowers with total lending of Rp 388.33 trillion. Meanwhile, the non-MSMEs using the facility reached 1.79 million borrowers with total lending of Rp 599.15 trillion.

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In addition, a number of indicators for economic recovery, such as consumer spending, car and motor cycles sales as well as the purchasing managers\' index, have continued to improve and are getting closer to the levels seen before the pandemic. "We closely monitor the effectiveness of the OJK’s stimulus policies. We hope that the impact can be seen in the first quarter of 2021, ”said Wimboh.

The OJK is also working to reduce bank lending rates in a bid to prevent new problems in the banking industry. According to Wimboh, lending interest rates at several banks have begun to decline following the cut in the benchmark interest rate of Bank Indonesia (BI). However, the pace of the decline in the lending rates in each bank is not the same.

Kompas/Priyombodo

Jahja Setiaatmadja

Lending rates

In the same forum, the president director of PT AKR Corporindo Tbk, Haryanto Adikoesoemo, expressed hope that financial authorities would able to issue rules to ensure the impact of the cut in BI rates to the interest rates of commercial banks would be optimal. "So far, the regulator (BI) only determines the benchmark interest rate, and appeal banks to follow it. However, the impact of the policy to cut the benchmark rate cannot be felt by the real sector because the decline in bank interest rate is so slow, "he said.

According to Wimboh, a number of banks will have to bear extra costs due to the loan restructuring program because they, for example, have to postpone interest payment. In addition, banks also have to pay interest on third party funds (deposits), which have shown a significant increase lately. "This is a challenge for banks because stability must be maintained so that there is no tradeoff between lowering interest rates and financial system stability," he said.

In order to improve services during the Covid-19 pandemic, BCA, for example, BCA had to invest up to Rp 5.2 trillion in digital services, which had caused a significant increase on the bank’s cost of funds.

Meanwhile, BCA’s president director Jahja said that generally banks could lower interest rates only if the cost of funds could be reduced. In order to improve services during the Covid-19 pandemic, BCA, for example, BCA had to invest up to Rp 5.2 trillion in digital services, which had caused a significant increase on the bank’s cost of funds.

"The reduction in the basic lending rate will depend on the cost of funds of the bank itself. The decline in the cost of funds due to efficiency will open up more room for a reduction in bank interest rates, "he said.

KOMPAS/RONY ARIYANTO NUGROHO

Long lines of KRL commuter train passengers are seen at Bogor Station, Bogor city, West Java, Monday (8/6/2020). A number of workers and economic actors from the Greater Bogor region began to leave for Jakarta because a number of offices and economic activities began to open during the Transitional Large-Scale Social Restriction (PSBB) in Jakarta. Due to the limited number of the trains due to the imposition of a limited number of means of transportation results in the long lines with close distances among people at a number of stations through which the trains pass. The line at Bogor Station itself was seen from 5 a.m. until 9 a.m.

Jahja also said that low lending interest rate was not the only factor to improve the intermediary function of banks. The increase in loan to the business sector depends on the ability of the business players to do business normally or not. Although the interest rate for working capital loans is low, the business players will not raise them if they are not needed.

"Indeed, the NPL (nonperforming loan) in the banking sector seems low, but the ‘loan at risk” is currently increasing from 4 percent to 18-20 percent. Until now, the fate of the companies which have benefited from the loan structuring program is still a mystery whether they will survive or die,” said Jahja.

Digitization

The Covid-19 pandemic has changed many things, including in the banking services. The president director of Bank OCBC NISP, Parwati Surjaudaja, said that customers would no longer need to visit bank offices. "Later, the people who use conventional banking services are only old customers and debtors with conservative businesses," he said.

According to Parwati, Bank OCBC NISP\'s digital channels received a good response from customers. "In mobile banking services for individual customers, the increase in the number of transactions reached 58 percent annually. The transaction volume increased 92 percent on an annual basis and the number of users increased 41 percent, " she said. (DIM)

(This article was translated by Hendarsyah Tarmizi).