Board governors of Bank Indonesia decided to maintain the BI 7-Day Reverse Repo Rate at 3.50 percent, the Deposit Facility rate at 2.75 percent, and the Lending Facility interest rate at 4.25 percent - Photo by BI Office

JAKARTA (TheInsiderStories) – Board governors of Bank Indonesia decided to maintain the BI 7-Day Reverse Repo Rate (BI-7DRR) at 3.50 percent, the Deposit Facility rate at 2.75 percent, and the Lending Facility interest rate at 4.25 percent. The central bank also lowered Indonesian economic growth from 4.3 – 5.3 percent to 4.1 – 5.1 percent in this year.

“We can see that in the first and second quarters, although vaccination, there are certainly restrictions on human mobility. That is why the rate of consumption is not as high as we expected,” said the governor, Perry Warjiyo told reporters virtually on Tuesday (04/20).

He also optimistic that Indonesian Rupiah will return to the strengthening path, along with less global uncertainty and the start of foreign inflows. He added that the weakening of the local currency in recent weeks was inevitable due to the domestic needs.

Warjiyo revealed, the policymakers decision is inline with the need to maintain the stability of the Rupiah against the impact of high global financial market uncertainty. BI, he said, will maintain the exchange rate policy by remaining on the market through triple intervention.

Then, continue the monetary operation strategy, increasing the use of Bank Indonesia SUKUK instruments with tenors of one week to 12 months in order to strengthen sharia monetary operations, which have been in effect since April16,  2021. In addition, continuing the accommodative macro-prudential policy by maintaining a countercyclical buffer ratio of zero percent, a macro-prudential liquidity buffer ratio of 6 percent with a repo flexibility of 6 percent, Sharia PLM ratio of 4.5 percent with a repo flexibility of 4.5 percent.

The central bank also predicted balance of payments is predicted to remain robust and the current account deficit in the first quarter of 2021 is predicted to be low, supported by a trade balance surplus of US$5.52 billion, continuing the previous quarter’ surplus of $8.27 billion. This positive performance was mainly supported by demand from China, the United States and Japan, as well as increases in world commodity prices.

The increase in export value was recorded in a number of primary commodities, such as CPO and metal ores, a number of manufactured commodities, including iron and steel, organic chemicals, and motor vehicles. While, the capital account is predicted to experience a surplus, supported by inflows of capital in the form of foreign investment and portfolio investment.

Portfolio investment in the first quarter of 2021 is also estimated to record a net inflow of $5.43 billion. In the same quarter, the position of foreign exchange reserves was recorded at $137.1 billion, equivalent to financing 10.1 months of imports or 9.7 months of imports and servicing of government external debt, and is above the international adequacy standard of around 3 months of imports.

“Looking forward, the current account deficit is predicted to remain low at around 1.0 – 2.0 percent of GDP in 2021, thus supporting the resilience of the external sector in the Indonesian economy,” said the governors.

The Bank also reported the inflation remains low inline with weak demand and adequate supply. Consumer Price Index inflation in March was recorded at 0.08 percent on monthly basis and 1.37 percent in annual basis. Inflation in 2021 is predicted to remain under control within the target of 3.0 percent ± 1 percent.

Written by Editorial Staff, Email: theinsiderstories@gmail.com