Indonesia monitoring virus impact on companies and spillover risk, says finance minister

JAKARTA, Aug 7(Reuters): Indonesian financial authorities are assessing the economic impact of a surge in Covid-19 cases, including the effect on the corporate sector and the spillover risk to the financial system, Finance Minister Sri Mulyani Indrawati has announced.

South-East Asia's biggest economy has been battling a spike in Covid-19 infections for more than a month, imposing mobility curbs in areas that include much of Java and Bali islands.

Considered Asia's new coronavirus epicentre, Indonesia has reported 3.57 million cases and more than 102,000 deaths.

While an economic recovery gained momentum in the second quarter, during which gross domestic product expanded 7.07% on a yearly basis, analysts said the virus resurgence will hamper activity and put downward pressure on third-quarter growth

Sri Mulyani said authorities are working to make sure the economic scar left by the new wave will not deepen nor widen

"We in the financial system stability board will focus our monitoring to identify risks ... especially in the corporate sector which could have a spillover risk to the financial system," she told a joint news conference with other financial policymakers.

This entails evaluating supply and demand of credit and examining every sector and subsector to see which will be resilient to the outbreak, Sri Mulyani said.

"What we also need to see is the risks that emerge, including risk of debt restructuring through the PKPU process, given there has been a rise in the number of PKPU and bankruptcies," she said.

PKPU is an Indonesian court proceeding that can be initiated by either a debtor or creditor seeking settlement of bad debt. The court could also declare bankruptcies.

Authorities will then formulate a response to the situation, she said, without elaborating on potential measures.

The chairman of the Financial Services Authority Wimboh Santoso told the news conference an incentive to relax credit restructuring rules will be extended beyond the current March 2022 deadline in the wake of the new wave.

Meanwhile, Bank Indonesia Governor Perry Warjiyo repeated a pledge to keep an accommodative stance in all of the central bank's policies this year to support the economy. - Reuters
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