The central bank sees economic growth is expected to increase in the range of 5.1-5.5 percent in 2020 - Photo by Bank Indonesia.

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) is optimistic the prospects for Southeast Asia’s largest economy in 2020 will be maintained with continued growth momentum. Economic growth is expected to grow in the range of 5.1-5.5 percent, the governor Perry Warjiyo said at the bank’s annual meeting in Jakarta on late Thursday (11/28).

“Inflation will be kept under control within the target corridor of 3.0+1 percent. Meanwhile, the current account deficit (CAD) will be controlled within the manageable threshold of 2.5-3 percent of GDP in 2020, underpinned by a significant capital and financial account surplus, which will support external stability,” the governor revealed.

Furthermore, the Rupiah exchange rate is predicted to move stably in 2020. In terms of the bank intermediation function, BI projects deposit growth at 8-10 percent in 2020 and growth of outstanding loans disbursed by the banking industry at 10-12 percent in line with lower interest rates and a stronger economic outlook.

“In the medium term, Indonesia’s economic outlook will continue to improve. Economic transformation will catalyze stronger growth, coupled with a narrower CAD and low inflation,” Warjiyo said.

President Joko Widodo who join the event took the opportunity to confirm adequate room to stimulate national economic growth through the private sector, considering that the State Budget contributes just 14.5 percent to economic growth.

“The state budget just supports for 14-16 percent, it means the rest is influenced by the private sector. So, the private sector gives it when there are opportunities,” the President said in his remarks.

Six Focus Areas to Maintain Stability

Against a backdrop of turbulent global economic headwinds, the policy mix instituted by the central bank in 2019 will be strengthened further in 2020. To that end, BI will implement policy based on six focus areas to maintain stability and build growth momentum, Warjiyo noted.

First, monetary policy will remain accommodative. Second, the accommodative macroprudential policy will be maintained to catalyze economic financing.

Third, payment system policy will focus on strengthening digital-based instruments and public infrastructure through five payment system initiatives, namely developing open banking; strengthening the configuration of the retail payment system; strengthening financial market infrastructure; developing public infrastructure for data; and strengthening the regulatory, licensing, and supervisory framework.

Fourth, the financial market deepening policy will be strengthened to support effective monetary and macroprudential policy. Fifth, policy to empower the Islamic economy as well as micro, small and medium enterprises as new sources of economic growth in Indonesia.

Sixth, strengthening synergy with a focus on macroeconomic and financial system policy synergy to maintain stability; economic transformation synergy to catalyze economic growth and bolster the economic structure, and synergy in digital innovation to support digital economic and financial integration.

In his speech, the governor detailed three important economic lessons from 2019 that could be plucked as a strategy to confront declining globalization and increasing digitalization in order to strengthen resilience and catalyze economic growth.

“First, macroeconomic and financial system policy mix synergy, which will be strengthened to ensure national economic resilience,” he said.

Second, economic transformation to achieve stronger growth through the development of new domestic growth sources with a focus on the manufacturing industry and tourism. Third, innovation in the digital economy and finance to strengthen economic competitiveness in the national interest and bridge the inequality gap.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com