JAKARTA (TheInsiderStories) – Bank Indonesia (BI) kept the 7-day Reverse Repo (BI-7DRR) rate at 6 percent followed the Federal Reserves (Fed) monetary action. The Deposit Facility interest rate of 5.25 percent, and the Lending Facility interest rate of 6.75 percent to reduce the current account deficit, said the central bank today (12/20).
BI’ Governor Perry Warjiyo said, the Bank made the decision after considering global and domestic economic situation. He reveled, world economic growth was in a sloping condition and financial market uncertainty remained high.
Moreover, he stated, United States (US) is expected to face economic consolidation in 2019 after enjoying strong economic growth in 2018. This prospect is expected to reduce the pace of Fed fund rate in 2019, after increasing by 25 basis points to 2.25-2.5 percent yesterday.
While in Europe, he rated, the economic growth prone to slow down, although the direction of normalization of the European Central Bank’ monetary policy in 2019 remains a concern. Then, in developing countries, China’s economic growth continued to slow due to weaker consumption and net exports and the influence of tensions between trade relations with the US, and the continued deleveraging process in the financial system.
“The sluggish economic growth in the world and the high risk of trade relations between countries and geo-politics have had an impact on the low volume of world trade. In line with that, global commodity prices declined, including world oil prices due to increased supply from the US, OPEC and Russia,” said Warjiyo.
From the domestic side, Indonesia’s economic data in the fourth quarter of 2018 showed that private consumption and investment remained strong. On the other hand, the contribution of net exports is expected to remain negatively.
He stated, its affected by slowing exports amid the sluggish global demand and declining commodity export prices. While, imports remain high driven by strong domestic demand.
“Going forward, we predicts 2019 Indonesia’s economic growth will remain good at around 5.0-5.4 percent, supported by maintained domestic demand and improved net exports,” added by Warjiyo.
BI reported, the Rupiah in November 2018 rose by 6.29 percent point-to-point compared to the previous month’s level, influenced by considerable foreign capital inflows due to the positive impact of the conducive domestic economy and escalating tensions between US-China trade relations which had eased.
As of December, the Rupiah has been under pressure due to increasing global uncertainty and increasing demand for seasonal foreign exchange for year-end needs. Going forward, he said, BI will continue to be aware of the risks of uncertainty in the global financial market by continuing to carry out measures to stabilize the exchange rate.
Furthermore, he explained, the inflation rate remained low and stable in the 2018 inflation target of 3.5 ± 1 percent, supported by the consistency of the central bank’ policies in directing the expectations, including in maintaining exchange rate movements in accordance with its fundamentals.
While, financial system stability was maintained, banking capital adequacy ratio remained high at 22.9 percent in October 2018 and liquidity ratio of 19.2 percent in October 2018. In addition, the ratio of non-performing loans remain low at 2.6 percent (gross) or 1.2 percent (net).
From the banking intermediation function, loan growth in October 2018 was recorded at 13.3 percent in annual basis (YoY), higher than the previous month’s growth of 12.7 percent. The growth of Third Party Funds in October 2018 was 7.6 percent (YoY), an increase compared to the previous month’s growth of 6.6 percent.
Moreover, economic financing through the capital market, issuance of shares (IPO and rights issue), corporate bonds, Medium Term Notes, and Negotiable Certificates of Deposit during January until October 2018 was recorded at Rp178.9 trillion (US$12.34 billion), down compared to the achievement of the same period in 2017 of Rp 231.6 trillion.
In 2019, BI predicts loan growth to be in the range of 10-12 percent, while growth in deposits is estimated at around 8-10 percent. Going forward, the Bank will continue to coordinate with relevant authorities to help maintain financial system stability, including monitoring the adequacy and distribution of liquidity in banks.
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