Monitoring
the latest economic conditions in Indonesia, the impact of COVID-19 in
particular, Bank Indonesia Governor, Perry Warjiyo, announced 4 (four) new developments
on Thursday (9/4) along with the policy measures instituted by Bank Indonesia
as follows:
1.
Rupiah
exchange rate stable and tend to appreciate to Rp15,000 at the end of
the year.
This morning (9/4), the
value of Rupiah opened at Rp16,200 per US dollar and during this media briefing
this afternoon, it was transacted at Rp15,930 per US dollar. The stronger
rupiah follows the dynamic market mechanism, inextricability linked to the
roles of market actors and exporters who also maintain exchange rate stability.
Such stronger rupiah reduces the requirement for Bank Indonesia to stabilize
exchange rate. The stronger rupiah is
affected by the following factors:
a.
Rupiah exchange rate remains fundamentally
undervalued, and therefore, it tends to appreciate.
b.
The market puts confidence in policy measures
instituted by the Government, Bank Indonesia, Indonesian Financial Services
Authority (OJK), and Deposit Insurance Corporation (LPS) in COVID-19 handling
and its fiscal, monetary, and credit impacts.
c. Global
risk condition is gradually improving despite its relatively high level. One of
the indicators is the improving volatility index (VIX).
VIX stood at 18.8 prior to COVID-19 pandemic. When the global financial market
felt a surge of panic in the second and third weeks of March 2020, VIX stood at
82 as its highest level. However, with
policy measures and fiscal stimulus taken by different countries, VIX is
gradually decreasing. In addition, the market also observes that the number of
COVID-19 cases is gradually decreasing through the measures taken by different
countries, including Indonesia, to lower the spread of COVID-19 pandemic.
Large-Scale Social Distancing (PSBB) to be implemented in DKI Jakarta from 10
April 2020 is predicted to curb the spread of COVID-19 pandemic.
2. Official Reserve assets predicted to
increase.
Official
reserve assets are predicted to increase to around USD125 billion from USD121
billion by the end of March 2020. It results from issuance of global bonds
worth USD4.3 billion by the Government. Official reserve assets are more than
adequate for import financing, repayment of the government’s offshore debts,
and implementation of exchange rate stabilization measures.
3. Repurchase
agreement line (repo line) cooperation with the US Federal Reserve worth USD60
billion ready for use if required.
It means that the repo
line agreement is administratively and technically ready for use if required to
add US dollar liquidity though it will not add reserve assets. It indicates the
Federal Reserve’s confidence in Indonesia for management of Indonesia’s economy
and economic outlook in the future.
4. Prices in
the market controlled and low.
The
Price Monitoring Survey conducted by Bank Indonesia and 46 Bank Indonesia
Representative Offices shows that prices in the market are controlled and low.
Price monitoring in the second week of April 2020 indicates inflation will
stand at around 0.20% (mtm) or 2.80% (yoy). It is affected by the following
sectors:
a.
Coordination between the central and regional
governments through Inflation Control Team/Regional Inflation Control Team
(TPI/TPID) to ensure fulfillment of basic needs.
b.
Economic growth level of Indonesia will be
lower than the national production capacity, resulting in negative output gap
and inflationary pressure as demand is controlled.
c.
Marginal impacts of Rupiah exchange rate on
inflation.
d.
Expected inflation is well anchored from both
consumer and producer sides.
Bank
Indonesia will continue to strengthen coordination with the Government and
Indonesian Financial Services Authority (OJK) to carefully monitor the dynamics
of COVID-19 transmission and the economic impact on Indonesia over time,
including the coordinated policy measures required to maintain macroeconomic
and financial system stability, as well as solid and resilient economic growth.
Volatility
Index/VIX is an index to measure
financial market volatility.
