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Jakarta Post

Banking industry update: The most challenging year since 1998

  • Rully Arya Wisnubroto

    Office of the Chief Economist, Bank Mandiri

Office of the Chief Economist, Bank Mandiri   /   Thu, June 18 2020   /  01:00 am
Banking solutions: State-owned Bank Mandiri helps businesses face the current challenging times through online banking solutions. (./.)

This year will be extremely challenging for the banking industry in Indonesia. It will probably be the most challenging year since the 1998-1999 monetary crisis. Loan growth will decelerate and asset quality will weaken because of the sharp slowdown in economic activity, especially in the second and third quarters, as a result of large-scale social restrictions (PSBB). Although the authorities have granted many relaxations, loan demand will weaken across almost all sectors. The improvement of demand for loans will depend on economic growth. We hope economic recovery will come soon, at least in the fourth quarter of this year, although it will not return quickly to the 5 percent growth rate before the pandemic. The government, under the Finance Ministry, expects the domestic economy to contract by between 0.4 percent and 1 percent this year. We at Bank Mandiri estimate that the dome...