Consumer Confidence Index Decline in March 2019
This afternoon, Bank Indonesia will make a decision on the latest monetary policy for this month after cut the benchmark rate by 25 basis points to 4 percent in July- Photo by Bank Indonesia

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) decided to maintain the benchmark interest rate, BI 7 days reverse repo rate at 6 percent. It is in line with global and domestic economic conditions.

Governor of BI Perry Warjiyo explained, some central banks have begun to loosen the macroeconomic policies, but it is not able to help the recovery of global economics. The tension between the United States (US) and China is getting stronger so it impacts the shifting of inflow from developing to wealthy countries.

From the domestic side, the Indonesian economy is still growing in the range of 5-5.4 percent. The inflow of foreign capital will continue to support the improvement in the current account deficit in the range of 2.5-3 percent at the end of 2019, improved from 2018.

In terms of the rupiah exchange rate, it continues to weaken until 1.45 percent at May 15, 2018, from 1.36 percent in April 2019. It is occurred due to trade wars and seasonal patterns, dividend payments and increased demand. However, BI will remain in the market and deepen the financial market in anticipation of further weakness.

Furthermore, loan growth was recorded 11.5 percent in March 2019, weakening from February 2019 of 12.1 percent. However, BI is still optimist, the loan will grow 10-12 percent at the end of this year.

Previously, the tension between two the great countries in the world impacted to Jakarta Composite Index and rupiah exchange rate. Indonesia government takes into account of rupiah movement and trade war in the global market. Therefore, President Joko Widodo summoned ministers and related stakeholders in the financial sector to highlight the latest economic developments.

Coordinating Minister for Economic Affairs Darmin Nasution explained the meeting between President Jokowi and the stakeholders discussed currency movement and trade war between the US and China because of the potential to disrupt stability.

To anticipate it, the government is currently pushing for investment flows to enter various sectors so it will support in maintaining national economic resilience amid the dynamics of global economic uncertainty.

Analyst of PT Binaartha Sekuritas M. Nafan Aji explained there are two factors affected the movement of the index. One of them is the unsolving negotiations between the US and related to trade war. According to Aji, the US did not see a full commitment from China to resolve disputes bilaterally. Consequently, the US imposed import duty on Chinese products of 25 percent which caused both of their currencies to move fluctuated.

Furthermore, investors also realize there will be many selling actions in this month or called Sell on May and Go Away. In this action, many investors change their portfolios by moving their investments from stocks to bonds or vice versa. “However, it will not last in a long time, so tomorrow there will be a sign of a rebound,” he said.

Economist of PT Bank Central Asia Tbk (IDX: BBCA) David Sumual also did not see any significant impact from the weakening of the rupiah because it lasts temporarily. As a result, it will not impact on economic fundamentals such as economic growth or lending.

The two parties, US and China, that caused the weakening of the rupiah are also believed will renegotiate to solve the issue because there is no fastest way other than that to complete the issue of a trade war.

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