JAKARTA (TheInsiderStories) – Bank Indonesia (BI) held its benchmark 7-day reverse repo rate (BI7DRRR) at 5 percent during its January meeting on Thursday (01/23). The decision was consistent with the effort to boost gross domestic product (GDP) growth. The lending and the deposit facility rates were also held unchanged at 5.75 percent and 4.25 percent respectively.
Monetary policy remains accommodative and consistent with controlled inflation forecasts within the target range, maintained external stability, and efforts to maintain the momentum of domestic economic growth. The monetary operations strategy continues to aim at maintaining adequate liquidity and supporting the transmission of an accommodative policy mix, the central bank said.
Going forward, the central bank will pay close attention to developments in the global and domestic economy in utilizing an accommodative policy mix space to maintain controlled inflation and external stability, and also support the momentum of economic growth, its governor Perry Warjiyo noted.
The governor sees the prospect of economic recovery in 2020 is beginning to be seen and supports the continuing decline in global financial market uncertainty. The improvement in the global economy was mainly supported by growth estimates in a number of developing countries that were higher than previously estimated and optimism after the United States (US)-China phase-one trade deal agreement.
“With these developments, the economic growth in 2019 could reach around 5.1 percent and an increase in the range of 5.1-5.5 percent in 2020,” the governor said.
Indonesia’s balance of payments is forecasted to continue to improve in the fourth quarter of 2019, supporting external sector resilience, Warjiyo said. This is supported by rising inflows of foreign capital and controlled current account deficits. The inflow of foreign portfolio investment in this quarter was recorded US$6.36 billion, higher than $4.88 billion in the previous quarter.
Meanwhile, the controlled current account deficit was supported by the improved trade balance, which in December recorded a deficit of $0.03 billion, sharply decreased compared to the previous month’s deficit of $1.39 billion. The deficit in 2019 is estimated to be around 2.7 percent of GDP and in 2020 will remain under control in the range of 2.5-3.0 percent of GDP.
The foreign exchange reserves in 2019 increased to $129.2 billion, or the equivalent of financing of 7.6 months of imports or 7.3 months of imports and were above the international adequacy standard of around 3 months of imports.
Meanwhile, the Rupiah exchange rate continued to strengthen 1.74 percent (ptp) compared to the level at the end of December. This development continued to strengthen in 2019 which recorded 3.58 percent (ptp) or 0.76 percent on average. The strengthening of the Rupiah was driven by the supply of foreign exchange from exporters as well as continued inflows of foreign capital in line with Indonesia’s economic prospects that remained intact, the attractiveness of the domestic financial market remained large, and the uncertainty of global financial markets subsided.
Furthermore, inflation in 2019 was recorded at 2.72 percent (yoy), down compared to 2018 inflation of 3.13 percent and within the target range of 3.5 percent ± 1 percent. The growth shows that inflation for the last five years has consistently been within its target range. Going forward, the central bank remains committed to maintaining price stability aims inflation in 2020 is maintained within its target range of 3.0 ± 1 percent.
Written by Lexy Nantu, Email: email@example.com