Global Volatility Subsides as China’s Economy Slowly Recovers: Sri Mulyani

Infographics on Budget Implementation during the COVID-19 pandemic. (Source: Ministry of Finance).

Global volatility has begun to subside last month, according to Indonesian Minister of Finance Sri Mulyani.

Sri Mulyani, who is also chairperson of the Financial System Stability Committee (KSSK), also noted that China’s economy has shown recovery following a deep contraction in the first quarter this year due to the pandemic.

China’s Purchasing Managers’ Index (PMI) also started to rise in March, along with the reopening of its various economic activities, the Minister added.

Commenting on Indonesia’s economy, the Minister said: “(Indonesia) State Budget revenues stood at 16.8%, growing by 7.7%, but tax revenue growth sees negative 2.5 percent. State expenditure absorption reached 17.8% growing by 0.1%, while the deficit is recorded at Rp76.4 trillion or 0.45% of gross domestic product (GDP). The Government will continue to monitor the development of these economic indicators,” the Minister said in a virtual press statement, Monday (11/5).

Regarding development of the country’s financial sector, the Minister said that according to the Financial Services Authority (OJK), Indonesia’s financial service sector until April remained stable despite the trend in weakened real sector and potential weakening of the financial sector due to arrears in principal and interest payments.

However, she added, a number of intermediary indicators in the financial services sector posted positive performance and risk profile of the financial services industry remains in check.

Meanwhile, although the Capital Adequacy Ratio (CAR) has dropped, it is still quite high in March at 21.72 percent compared to 23.31 percent in December 2019. Non-performing loans (NPL) ratio has slightly increased to 2.77 percent compared to 2.53 percent in December.

As of 22 April, liquidity adequacy indicator also shows a positive trend as seen from the ratio of liquid assets to third party funds (TPF) at 22.36 percent (December 2019: 20.86 percent), which is still above the threshold, while  intermediary performance of financial service institutions as of March is still supported by banking resilience, liquidity, and money market stability.

Banking loans grew by 7.95 percent year-on-year (yoy), mainly from foreign currency credit growth, accompanied by growth in TPF of 9.54 percent yoy.

Financing Company Receivables remains slightly moderate but grew by 2.49 percent yoy.

Sri Mulyani further said the success of handling the COVID-19 pandemic can greatly affect the domino effect on the economy and financial sector, adding that the KSSK will continue to strengthen its synergy and adopt extensive measures to maintain macroeconomic and financial system stability. (MoF/EN)

Translator: Muhardi
Reviewed by: M. Ersan Pamungkas