Construction Infrastructure Development Booms, Construction Sector Credit Grows 21 Percent

To reduce regional disparities and accelerate infrastructure development, infrastructure development has become a priority in the Joko Widodo and Jusuf Kalla administration. The government's seriousness in infrastructure development is evident in the budget allocated to the sector, reaching Rp 387 trillion in 2017. Development is not limited to Java but encompasses all regions from Sumatra to Papua.

The surge in infrastructure development has resulted in a 21 percent growth in bank credit to the construction sector, reaching Rp 248.1 trillion in September 2017 compared to September 2016 (YoY). This was followed by an 18 percent growth in credit to the financial intermediary sector, reaching Rp 208.69 trillion (YoY), and a 12.37 percent growth in credit to the education services sector, reaching Rp 9.53 trillion (YoY).

Meanwhile, credit to the mining sector until September 2017 still recorded a 5.15 percent decrease, reaching Rp 110.11 trillion compared to September 2016 (YoY). Despite the increase in prices of mining commodities such as oil and coal, mining companies are still hesitant to expand this year. Banks are also cautious in extending credit to the mining sector due to its inherent risks. This is reflected in the increase of the Non-Performing Loan (NPL) ratio in the mining sector, which rose by 20.8 percent to Rp 8.95 trillion in September 2017 compared to September of the previous year.

(Read Databoks: Mining Sector NPL Above 7 Percent)