Slowing loan growth and rising savings point to a continued plunge in economic activity in the third quarter of this year as consumer spending weakens, economists say.

Loan disbursement only grew by 0.12 percent year-on-year (yoy) in September, Bank Indonesia (BI) data show. That figure is much lower than 1.04 percent annual growth recorded in August. Last year, Indonesia’s banking industry recorded loan growth of around 6 percent.

While loan issuance was almost stagnant, savings increased strongly last month. Banks’ third-party funds expanded by 12.88 percent yoy in September across the entire industry, higher than August’s figure of 11.64 yoy.

“Most consumers are still concerned about the uncertainties surrounding the COVID-19 pandemic, so those in the middle and upper-middle class segment chose to park their funds in the banks,” Bank Permata economist Josua Pardede told The Jakarta Post on Wednesday.

He went on to say that the cooling loan growth and rising savings in September were partly influenced by the reimposing of large-scale social restrictions (PSBB) by the Jakarta administration.

Governor Anies Baswedan announced in the month that the city would tighten the rules again because of the rise in COVID-19 cases. The restrictions lasted for four weeks, from Sept. 14 to Oct. 10, before Anies loosened the restrictions again on Monday.

Indonesia’s economy contracted 5.32 percent yoy in the second quarter and is expected to shrink further in the third quarter, following plunging household spending, which accounts for more than half of the country’s gross domestic product (GDP), and business investment.

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