Pressure on the financial stability system (FSS) is expected to increase as the effects of the COVID-19 pandemic, said Bank Indonesia (BI) in the latest report - Photo by Finance Ministry Office

JAKARTA (TheInsiderStories) – Pressure on the financial stability system (FSS) is expected to increase as the effects of the COVID-19 pandemic, said Bank Indonesia (BI) in the latest report. The widespread of the virus to many countries, including to Indonesia, poses a threat to global and domestic macroeconomic stability.

The global contagion also affecting Indonesia primarily through tourism, trade or export, and investment channels. MWhile, efforts to break the transmission of the virus in Indonesia have the potential to reduce production and economic activity, and put further pressure on the domestic financial system.

Observing that the COVID-19 pandemic has an impact on increasing pressures on the economy, BI has issued a policy mix aimed to support the risk mitigation efforts on the spread of virus, maintaining financial market and stability, and driving the momentum of economic growth.

Furthermore, the policymakers to take anticipatory actions in maintaining the financial stability in the midst of the impact of the epidemic was strengthened by the signing of government regulation lieu of law Number 1 of 2020. This authority was pursued through the commitment of synergy and close coordination with the government, Financial Service Agency (FSA), Indonesia Deposit Insurance, and national policy steps.

We believed, after the end of COVID-19 pressure, the global economy is predicted to increase again in 2021. Improvements in the global and domestic economy will drive corporate and household performance back to the recovery phase. This will encourage credit growth and third party funds to increase again in 2021, respectively

During second half of 2019, Indonesia’ financial system stability was maintained, amid continuing uncertainty due to declining globalization, increased risks on global financial markets, and the emergence of new unknown risks, said the report.

This is inseparable from the strong resilience of the banking industry, the resilience of corporate and household resilience, and the strong policy synergy between the central bank, the government and related authorities in maintaining growth momentum.

BI Governor, Perry Warjiyo conveyed, that BI’ macro-prudential policy in the future will be focused on efforts to maintain the financial stability  by anticipating the potential for increased risk in the financial sector affected by the spread of COVID-19.

In the March’ meeting of Financial System Stability Forum (FSSF), the chairwoman, Sri Mulyani Indrawati said, the policymakers ready to take quick steps to maintain the financial market under global pressures during the COVID-19 outbreak. She also claimed will use all the tools including the same protocol was implemented during 1998 crisis.

The minister of finance also expect the pandemic not last long and the domestic economy could rebounding soon. She noted, the ministry and the regulator will take various measures so that stability is maintained even though the pressure is currently very large with the same protocol as the 1998 crisis.

Warjiyo rated, selling panic in the financial market caused foreign investors withdraw their funds from emerging markets, including Indonesia. Therefore, BI stabilization measures provide liquidity in order to create a capital market panic, he noted.

He assured that foreign exchange reserves worth of $130.4 billion is more than enough to counter the COVID-19 impact. We will continue to coordinate with the government to make further steps to bring in foreign exchange. Our focus is on maintaining confidence and foreign exchange availability.

While, chairman of FSA, Wimboh Santoso stated, the regulator has implemented various policies to maintains the market confidence. Together with the self regulator office, the agency has regulated short selling, auto rejection, halt trading, buyback scheme to curb the stock market.

In the capital market, you don’t have to worry about everything listed on the capital market, fundamentally good. In the future, we will continue to make several options.

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