JAKARTA (TheInsiderStories) – Governor of Bank Indonesia (BI) Perry Warjiyo optimistic balance of payment (BoP) will record a surplus in the first quarter (1Q) of 2019, continuing the record at the 4Q of 2018, which was surplus US$5.4 billion. In the first until the third quarter (Q3) of 2018, the state’s BoP recorded a deficit.
He also believed, the current account deficit (CAD) in the 1Q of 2019 will be lower than the 4Q of 2018.
“This year, Indonesia’ economy will grow positively and market also will be improving,” he said on Friday (03/01).
He explained, the central bank recorded that the foreign capital inflows to Indonesian market reached Rp 63 trillion ($4.5 billion) at the end of February. While in the same period of last years was only Rp 6 trillion.
Then, he stated that the biggest inflow of foreign capital derived from government which noted Rp 49.5 trillion. Then, followed by stock of Rp 12.6 trillion and BI certificates of Rp 1.4 trillion.
Responding on the Feb. 2019 deflation which was 0.08 percent on monthly basis and 2.57 percent y-o-y, he assumed those are was predicted and described the commodity prices in control. Furthermore, BI will coordinate with region and central government to maintain the commodity prices.
While comment on Rupiah, Warjiyo rated is still undervalued and that should be stronger than the current price which was in Rp 14.060 against US dollar. He assumed by the inflow of foreign capital, increasing of economic growth, low inflation, more dovish of the Fed Fund Rate, the swap mechanism and domestic non deliverable forward could strengthen the Rupiah.
The local currency in the 4Q of 2018, on a point to point basis, rose by 3.63 percent compared to the final level of the third quarter of 2018, supported by the balance of payments which recorded a surplus. The strengthening of the Rupiah continued in January which reached 2.92 percent and continued to occur in February.
In the last meeting, BI’ Governor Board decided to maintain a BI 7 day Reverse Repo (7-DRR) rate at 6 percent, a Deposit Facility interest rate of 5.25 percent, and a Lending Facility interest rate of 6.75 percent.
Warjiyo said, the decision is consistent with efforts to strengthen external stability, particularly to control the CAD within a safe limit and maintain the attractiveness of domestic financial assets. The Bank also continues to pursue a monetary operations strategy to increase the availability of liquidity in driving bank financing.
Furthermore, he revealed, the decision was made in regarding to global and domestic conditions. He considered, world economic tends to be slowed, caused by reduced uncertainty in the global financial market. As an example, he said, Untied States (US) economic growth slowed due to the limited fiscal stimulus, structural problems of the workforce, and the decline in business confidence.
The increase in the Federal Reserves Fund Rate (FFR) interest rate is expected to be lower and the reduction in the central bank balance sheet becomes smaller than planned. Global economic and financial developments on the one hand provide challenges in encouraging exports, but on the other hand increase the inflow of foreign capital to developing countries, including Indonesia.
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