BI Governor Perry Warjio sits beside President Jokowi at the 2018 Annual Meeting, at the JCC Assembly Hall, Jakarta (11/27) - Photo by the President's Office

JAKARTA (TheInsiderStories)Bank Indonesia (BI) sees 2019 would be a challenging year for the country amid the global economy is growing unevenly and is still full of uncertainty, said the governor at the annual meeting on Tuesday (11/27).

There are three things need to look in 2019, said BI Governor Perry Warjiyo. First, world economic growth which in 2018 is estimated to be around 3.73 percent and will slope to 3.7 percent in 2019.

Second, He continued, related to the Federal Reserves (Fed) monetary stance to be followed by the nomination of monetary policy in Europe and other developed countries. He predicted, the Fed will raise interest rates three more times next year.

“Third, uncertainty in global financial markets has pushed up the investment risk premium to emerging market countries,” said Warjiyo. He added, a trade war between the United States (US) and China is likely to continue until 2019.

The economic crisis that occurred in Argentina and in Turkey, according to him, further worsened the perception of risk in the global financial market. That way, the currencies of emerging markets including Indonesia are affected.

Even so, Perry was grateful in the midst of the global economic uncertainty, Indonesia’s economic stability was maintained while the momentum of growth continued. “It was supported by strong domestic demand which grew 5.5 percent. Investment also grew strongly by 6.8 percent,” he stated.

Inflation, he said, was also maintained at the 3.2 percent range and the Rupiah is relatively well maintained and even strengthened. He asserted, next year the local exchange rate is relatively stable according to the market mechanism. At the end of 2018, it has also increased at the level of 14,000 thousand per US dollar

He also predicts that economic growth in 2019 will move in the range of 5-5.4 percent. This growth is supported by strong domestic demand, both consumption and investment as well as improving export performance.

Then, the 2019′ current account deficit will decrease to around 2.5 percent of gross domestic products (GDP), with import control measures and increase in exports and tourism.

The banking intermediary function and economic financing from the capital market will also continue to increase. Credit growth in 2019 is predicted to reach 10-12 percent, while growth in bank deposits reaches 8-10 percent with adequate liquidity maintained.

In the medium term, BI projects that economic growth will be even higher, reaching the range of 5.5-6.1 percent until 2024. The acceleration of infrastructure development and a series of the deregulation policy adopted so far will increase the productivity of the economy going forward.

Higher economic growth was also driven by a series of structural reform policies. With the acceleration of structural reforms in these various fields, economic growth can reach 6.1 percent in 2024 with the current account decreasing in below 2 percent of GDP. Income per capita also estimating to increase, from around $3,500 to more than $4,800 in 2024.

Furthermore the governor said, with un-conducive global economic conditions, the Bank Indonesia policy mix that has been taken in 2018 will be strengthened more in 2019. While, national economic resilience needs to be strengthened in the face of the risks of the impact of the global economic propagation.

Meanwhile, accommodative policies will continue to be pursued and expanded in the field of macro-prudential, payment systems, financial market deepening, as well as economic development of Islamic finance to drive the momentum of future economic growth.

Pre-emptive and ahead-the curve monetary policy stance will be maintained in 2019. The interest rate policy will continue to be calibrated according to domestic and global economic developments to ensure controlled information according to the target and stabilization of exchange rate according to its fundamentals.

Exchange rate stabilization is carried out by continuing to push for more efficient market mechanisms, without reducing the need for multiple interventions if needed especially in conditions the market is under pressure. The adequacy of foreign exchange reserves will continue to be maintained, and work and bilateral relations with the central bank and regional financial cooperation will continue to be strengthened.

On the other hand, Indonesian President Joko Widodo welcomed the intervention by BI in stabilizing the Rupiah by raising the benchmark interest rate to 6 percent. Because, in the last weeks, the exchange rate has strengthened and returned to around 14,500 per US Dollar.

Widodo also highlighted the consolidation that occurred between the fiscal sector and the real sector in line. Economic problems such as the trade balance, current transactions and everything are discussed together.

By seeing this synergy, the President is optimistic that he can realize some infrastructure development in the near future.

“Construction of the Jakarta-Surabaya toll road will be completed by the end of this year. Likewise, the Merak-Banyuwangi toll road will be connected in mid-2019,” he said.

Written by Linda Silaen and Staff Editor, Email: linda.silaen@theinsiderstories.com

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