JAKARTA (TheInsiderStories) – Bank Indonesia (BI) open to ease the monetary policy through adjusting interest rates, reducing the statutory reserve requirement or macro-prudential relaxation in 2020, said the governor today (10/31) in Jakarta.
Perry Warjiyo asserted, the central bank look various things before implementing the policy, one of them is a trade war between the United States (US) and China. If the US and China make an agreement in this trade war, he predicted that global economic growth could reach 3 percent in this year and 3.1 percent next year.
With this assumption, he claimed, the Bank is able to implement the accommodative monetary policies. “We will pay close attention to the development of the world economy,” said Warjiyo in one seminar today.
For this year, he is optimistic that Indonesia’ economic growth could reach 5.1 percent with a rupiah exchange rate of around Rp 14,000 per US dollar. He revealed, BI had issued several policy mixes that were expected to encourage economic growth such as lowering interest rates and down payment policies for automotive loans.
This week, the central bank had made a fourth straight cut, after decided slice the BI-7 days reverse repo (BI-7DRR) rate by 25 basis points to 5 percent. The Bank also cut the deposit and lending facility as the same percentage to 4.25 percent and 5.75 percent, respectively.
Warjiyo explained, the policy is consistent with inflation estimation and return on the domestic financial investment. He explained, this policy was also make by paying attention to external and internal situations.
Externally, said the governor, world economic growth has been slower, although financial market uncertainty has eased slightly after the US – China trade agreement in October 2019. The weakening of global economic growth is influenced by decline in trade volume due to tensions between US and China.
He noted, the US economy is also slowing down due to the declining confidence of economic actors. Similar thing also occurred in Europe, Japan, China and India. This condition, he adds, had an impact on the decline in global oil and commodity prices, which subsequently led to weak inflationary pressures.
“Various countries responded to this situation by loosening monetary policy and providing fiscal stimulus,” Warjiyo stated.
From the domestic side, export growth slightly improved amid global demand and declining global commodity prices. The improvement was influenced by manufactured export products such as motor vehicle exports to ASEAN countries and gold exports which grew positively.
In the next round, the policy mix pursued by BI and the government is expected to maintain the Indonesian economic growth. In 2019, economic is targeted to grow in the range of 5.0 – 5.4 percent and 5.1 – 5.5 percent in 2020.
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