​The BI Board of Governors Meeting agreed on 16-17th January 2024 to hold the BI-Rate at 6.00%, while also maintaining the Deposit Facility (DF) rate and Lending Facility (LF) rate at 5.25% and 6.75% respectively. The decision to hold the BI Rate at 6,00% remains consistent with the pro-stability focus of monetary policy, namely to strengthen Rupiah stabilisation policy, and as a pre-emptive and forward-looking measure to maintain inflation within the 2.5%±1% target corridor in 2024.  Meanwhile, Bank Indonesia will maintain pro-growth macroprudential and payment system policies to foster sustainable economic growth. Bank Indonesia will also hold an accommodative macroprudential policy stance to revive bank lending/financing to businesses and households.  Payment system digitalisation will be accelerated to increase transaction volume and expand digital economic and financial inclusion, which includes the electronification of (central and regional) government transactions. 

Bank Indonesia has, therefore, strengthened its mix of monetary, macroprudential and payment system policies to maintain stability and nurture sustainable economic growth through the following measures:

1. Rupiah stabilisation through foreign exchange market intervention with a focus on spot and Domestic Non-Deliverable Forward (DNDF) transactions, as well as government securities (SBN) in the secondary market.
   
2. Strengthening the pro-market monetary operations strategy for effective monetary policy, which includes optimising Bank Indonesia Rupiah Securities (SRBI), Bank Indonesia Forex Securities (SVBI) and Bank Indonesia Forex Sukuk (SUVBI).
3. Deepening prime lending rate (PLR) transparency policy with a focus on interest rates by economic sector (Appendix).
4. Accelerating payment system digitalisation and expanding cross-border payment linkages towards increasing economic and financial inclusion and expanding the digital economy and finance (EKD) as follows:
   1. Synergising campaign activities to expand payment system digitalisation initiatives, including QRIS Jelajah Indonesia, the Indonesia Credit Card and the Electronification of Regional Government Transactions (ETPD) in priority regions,
   2. Expanding QRIS implementation by aligning strategies to achieve QRIS targets, among others, and
   3. Expanding Indonesia Credit Card (KKI) implementation for the (central and regional) government segment, accompanied by more intensive monitoring activities.
5. Strengthening and expanding international cooperation with other central banks and authorities in partner countries, particularly in the area of central banking, which includes accelerating cross-border QRIS linkages and local currency transactions (LCT), as well as facilitating investment, trade and tourism promotion in priority sectors in conjunction with relevant institutions.

Policy coordination between Bank Indonesia and the Government is also constantly improved to maintain macroeconomic stability and bolster economic growth.  Bank Indonesia strengthens policy coordination with the (central and regional) Government and strategic partners, including the National Movement for Food Inflation Control (GNPIP) in various regions within the Central and Regional Inflation Control Teams (TPIP and TPID), as well as P2DD Teams to Accelerate and Expand the Electronification of Central and Regional Government Transactions.  Furthermore, policy synergy between Bank Indonesia and the Financial System Stability Committee (KSSK) is also strengthened to maintain financial system stability and revive lending/financing to businesses, particularly those in priority sectors.

Global economic growth is moderating, accompanied by easing financial market uncertainty.  Global economic growth is projected at 3.0% in 2023 before slowing to 2.8% in 2024.  The economies of the United States (US) and India remain solid on the back of household consumption and investment.  Meanwhile, China's economy is moderating in response to persistently weak household consumption and investment as a knock-on effect of the sluggish property sector and limited fiscal stimuli.  Inflation continues to fall in advanced economies, including the US, despite remaining above target, while inflation in China decreased due to the economic downturn.  The cycle of higher for longer monetary policy rates in advanced economies, including the Federal Funds Rate (FFR), is thought to have ended despite remaining high in the first semester of 2024 before potentially beginning to decline in the latter half of the year.  Government bond yields in advanced economies, including US Treasury bonds, are tracking gradual downward trends yet remain high in line with the long-term risk premia (term-premia) linked to the strong need for fiscal financing and servicing government debt.  Furthermore, there is milder pressure in the form of broad-based US dollar appreciation against various global currencies.  Consequently, such developments have maintained foreign capital inflows and alleviated currency pressures in emerging market economies (EME), including Indonesia.  Moving forward, several risks demand vigilance that could impact global economic uncertainty, such as unresolved geopolitical tensions, economic moderation in several countries (including China), as well as uncertainty concerning the timing and magnitude of unwinding high policy rates in advanced economies, particularly the Federal Funds Rate (FFR).

At home, the economic recovery in Indonesia remains intact, supported by domestic demand.  Economic growth in 2023 is projected in the 4.5-5.3% range, underpinned by consumption and investment after the Government ramped up spending towards the end of the year and continues to accelerate the completion of several national strategic projects (PSN).  In 2024, economic growth is projected to accelerate in the 4.7-5.5% range, supported by domestic demand, primarily in the form of ongoing consumption growth, including the positive impact of the general election and increasing investment, particularly building investment, in line with current PSN development, encompassing the new capital city (IKN).  Meanwhile, export performance remains subdued as a corollary of global economic moderation and lower international commodity prices.  By sector, the outlook for the manufacturing industry, wholesale and retail trade, information and communication, construction, as well as transportation and storage is promising.  Spatially, solid growth is also projected in all regions of the archipelago, particularly in Sulawesi-Maluku-Papua (Sulampua) due to mineral downstreaming, as well as in the Java region in response to consistently strong domestic demand.  Bank Indonesia will continue strengthening fiscal stimulus synergy with macroprudential stimuli to drive economic growth, particularly from the demand side.

Indonesia's Balance of Payments (BOP) is projected to record a surplus in 2023, thereby bolstering external resilience.  A positive trade balance persisted in December 2023, amassing a USD3.3 billion trade surplus, supported by Indonesia's main export commodities, such as coal as well as iron and steel.  Such developments supported a healthy current account in 2023, which is projected in the range of a 0.4% surplus to a 0.4% deficit of GDP. Foreign capital inflows have been maintained in the form of portfolio investment to the domestic financial markets, with a net inflow totalling USD5.4 billion recorded at the end of 2023 and USD3.0 billion in January 2024 (as of 15th January 2023). The position of reserve assets at the end of December 2023 increased to USD146.4 billion, equivalent to 6.7 months of imports or 6.5 months of imports and servicing government external debt, which is well above the international adequacy standard of around 3 months of imports.  In 2024, Bank Indonesia expects a BOP surplus to be maintained, accompanied by a narrow current account deficit in the range of 0.1-0.9% of GDP.  Meanwhile, the capital and financial account surplus is forecast to endure on the back of foreign capital inflows in line with positive investor perception regarding the promising domestic economic outlook and attractive yields on financial assets for investment.

Rupiah stability has been maintained in line with monetary policy consistency by Bank Indonesia.  As of 16th January 2024, Rupiah exchange rates were relatively stable, losing just 1.24% in value from the end of December 2023, given the stabilisation policy instituted by Bank Indonesia coupled with maintained portfolio inflows in line with attractive yields on domestic financial assets for investment as well as the positive economic outlook.  The Rupiah has outperformed other regional currencies, such as the Malaysian ringgit, Thai baht and South Korean won, which depreciated by 1.95%, 2.82% and 3.24% respectively.  Moving forward, Rupiah stability will be maintained, while tracking an appreciating trend in line with less global uncertainty, lower bond yields in advanced economies and milder US dollar appreciation pressures.  Moving forward, Rupiah performance will be supported by Bank Indonesia stabilisation policy and optimising the pro-market monetary operations strategy through the SRBI, SVBI and SUVBI instruments to attract portfolio inflows from abroad and deepen the money market. Meanwhile, Bank Indonesia continues strengthening coordination with the Government, banking industry and business community to support the effective implementation of instruments that retain the proceeds of natural resources exports in accordance with Government Regulation Number 36 of 2023 (PP DHE SDA) concerning the Foreign Exchange Proceeds of Exports and the Exploitation, Management and/or Processing of Natural Resources. 

Inflation is falling and remains in the target corridor.  Consumer Price Index (CPI) inflation in December 2023 was recorded at 2.61% (yoy), down from 5.51% (yoy) the year earlier, which is within the 3.0%±1% target. Lower inflation stemmed from various components as the tangible outcome of consistent pro-stability monetary policy by Bank Indonesia together with close policy synergy between Bank Indonesia and the (central and regional) Government.  Low core inflation was maintained in 2023 at 1.80% (yoy) due to low imported inflation, anchored inflation expectations to the target and massive economic capacity in response to domestic demand.  Volatile food (VF) inflation is under control, recorded at 6.73% (yoy), supported by close synergy to manage inflation between Bank Indonesia and the TPIP and TPID teams by strengthening the GNPIP movement in various regions to control food prices, including from the impact of El Niño.  Administered prices (AP) inflation was recorded at 1.72% (yoy) in line with minimal government intervention to adjust administered prices.  Moving forward, Bank Indonesia will continue strengthening pro-stability monetary policy and building policy synergy with the Government to ensure inflation in 2024 remains within the 2.5%±1% target range.

Bank Indonesia continues strengthening its monetary policy response and innovation to increase policy effectiveness in terms of controlling inflation and maintaining Rupiah stability.  The monetary policy response primarily consists of interest rate policy and Rupiah stabilisation policy.  In addition, Bank Indonesia continues optimising the SRBI, SVBI and SUVBI pro-market monetary instruments issued in 2023 to strengthen money market deepening policy and support efforts to attract portfolio inflows.  As of 16th January 2024, SRBI and SVBI auctions recorded Rp296.03 trillion and USD896.50 million in outstanding bids.  The SRBI vehicle is traded actively in the secondary market, as reflected by non-resident holdings totalling Rp75.44 trillion.   In addition, Bank Indonesia also issued SUVBI as a foreign exchange monetary instrument, with outstanding bids reaching USD244 million in the reporting period.  Such innovative instruments are expected to strengthen the external resilience of Indonesia's economy from the impact of global spillovers.

Monetary policy transmission remains effective.  The IndONIA money market reference rate is moving within the BI-Rate range, recorded at 5.81% on 16th January 2024.  SRBI rates remain attractive at 6.68%, 6.78%, and 6.87% for tenors of 6, 9 and 12 months respectively (as of 15th January 2024), thereby supporting SRBI effectiveness as a pro-market monetary instrument.  Meanwhile, the banking industry maintained competitive interest rates given adequate liquidity in the banking system and PLR transparency policy to increase interest rate efficiency in the banking industry.  Accordingly, the 1-month term deposit rate and lending rate remained low in December 2023 at 4.69% and 9.25% respectively.  Yields on SBN of 2 and 10-year tenors decreased in line with less uncertainty.

The bank intermediation function was robust in 2023, thereby supporting economic growth.  Credit growth in 2023 reached 10.38% (yoy), which is towards the upper end of Bank Indonesia's 9-11% projection.  On the demand side, loan growth increased in line with positive corporate and household sector performance.  On the supply side, credit growth was driven by improving risk appetite in the banking industry and adequate liquidity capacity, including the positive impact of liquidity policy by Bank Indonesia, such as the Macroprudential Liquidity Incentives Policy (KLM) and Macroprudential Liquidity Buffer (MPLB).  By loan type, credit growth was primarily supported by investment loans and working capital loans at 12.26% and 10.05% respectively.  By sector, loan growth was primarily driven by transportation, social services, trade, as well as electricity gas and water supply.  Furthermore, sharia finance increased 15.80% (yoy) in December 2023, while MSME loan growth reached 8.03% (yoy).  Moving forward, Bank Indonesia expects credit growth to accelerate in the 10-12% range in 2024 in line with the solid domestic economic recovery.  Furthermore, Bank Indonesia will continue maintaining effective KLM implementation and strengthening synergy with the Government, financial authorities, government ministries/agencies, the banking industry and businesses to revive bank lending/financing to sectors with large economic leverage to bolster sustainable economic growth.

Banking industry resilience remains solid.  The Capital Adequacy Ratio (CAR) in the banking industry is still high at 27.86%, recorded in November 2023.  Liquidity in the banking system remains ample, as reflected by a high ratio of liquid assets to third-party funds (LA/TPF) of 28.73% recorded in December 2023.  Bank liquidity has been maintained given large banking industry placements in liquid securities, coupled with KLM implementation.  Strengthening the pro-market monetary operations strategy has also supported the lending capacity of the banking industry, which includes trading SRBI in the secondary market, thereby providing the banks flexibility in terms of liquidity management.  Meanwhile, credit risk remains low, as reflected by NPL ratios of 2.19% (gross) and 0.75% (nett).  Overall, solid banking industry resilience is supported by sound corporate and household repayment capacity in line with corporate performance and improving expectations of household income.  The results of BI stress tests further confirmed solid banking industry resilience in the face of various uncertainty risks moving forward.  Bank Indonesia will continue strengthening synergy with the Financial System Stability Committee (KSSK) to mitigate various domestic and global economic risks that could potentially disrupt financial system stability.

Digital economic and financial transactions continue to perform solidly, supported by a secure, steady and reliable payment system.  In 2023, the value of digital banking transactions increased 13.48% (yoy) to reach Rp58,478.24 trillion, with 9.11% (yoy) growth projected in 2024 to Rp63,803.77 trillion.  Meanwhile, the value of electronic money transactions grew 43.45% (yoy) to Rp835.84 trillion, with 25.77% (yoy) growth projected in 2024 to Rp1,051.24 trillion.  The value of QRIS transactions enjoyed impressive 130.01% (yoy) growth in 2023, amounting to Rp229.96 trillion, with QRIS users and merchants totalling 45.78 million and 30.41 million respectively, dominated by MSMEs. On the other hand, the value of card-based payments using ATM, debit and credit cards reached Rp8,178.69 trillion in the reporting period, down 0.81% (yoy).  In terms of Rupiah currency management, total currency in circulation in December 2023 grew 7.33% (yoy) to Rp1,101.75 trillion.

Bank Indonesia maintains steady and reliable payment system, supported by adequate liquidity.  BI-FAST and Bank Indonesia – Real Time Gross Settlement (BI-RTGS) system transactions continue tracking upward trends, with BI-FAST established as the preferred method for the public to transfer funds.  Payment system stability is reflected by zero rejected transactions in the BI-RTGS system and Bank Indonesia – Scripless Securities Settlement System (BI-SSSS) caused by a liquidity mismatch.  The Bank Indonesia payment system is also supported on the operational side, as reflected by system availability maintained at 100%.  In addition, Bank Indonesia continues ensuring the availability of Rupiah currency fit for circulation in suitable denominations throughout all regions of the Republic of Indonesia through programs to circulate the Rupiah in 3T (outermost, frontier, remote) regions as well as mobile cash services, cash deposit services and the Sovereign Rupiah Expedition.