OJK Publishes Indonesia Banking Surveillance Report (LSPI) For Q2-2024

The Financial Services Authority (OJK) has released the Indonesia Banking Surveillance Report (LSPI) for the second quarter of 2024, which provides an overview and analysis of the global and domestic economic conditions, along with their implications for banking performance, credit distribution, and the risk profiles faced by the banking sector.

This report also includes banking policies issued by OJK during the reporting period, developments in banking institutions, and coordination among relevant banking agencies. Additionally, this report features a special discussion on the topic "Interconnection of The Fed's Monetary Policy with Macroeconomic Stability and the Conditions of Indonesian Banking."

During the reporting period, the global economic environment remained relatively stagnant, characterized by high uncertainty in global financial markets and divergent economic growth among countries. The economies of the United States, Europe, and the United Kingdom showed improvement compared to the previous quarter, while China's economy appeared to be relatively weak due to sluggish domestic demand and ongoing pressures in the property sector.

The persistent uncertainty in global financial markets is influenced by inflation rates that remain above target, prompting The Fed to maintain a high Federal Funds Rate (FFR) for an extended period (high for longer) until June 2024, with a reduction in FFR anticipated only at the FOMC meeting in September 2024.

Furthermore, it is essential to consider risk factors such as the ongoing geopolitical conflicts in the Middle East and Ukraine, disruptions in trade routes in the Red Sea, and climate change factors that could potentially lead to rising commodity prices and inflation in the future.

Concerns are also enveloping the market as uncertainty regarding the political situation in the United States rises in anticipation of the presidential election scheduled for November 2024. Amid these global developments, the domestic economy remained stable in the second quarter of 2024, albeit with a slight slowdown, supported by higher export growth, even as consumption, investment, and government spending experienced a deceleration compared to the second quarter of 2023.

In general, the slowdown in domestic consumption is believed to be a consequence of the conclusion of stimulus effects from the election period and Ramadan, coupled with a labor market that has not yet fully recovered.

The resilience of the domestic economy is also reflected in banking indicators for the second quarter of 2024, as evidenced by a robust growth in credit from commercial banks, which reached 12.36 percent year-on-year, an increase from the same period the previous year, which recorded 7.76 percent year-on-year.

Tag: Financial Services Authority Indonesia Banking Surveillance Report OJK