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4/17/2020 11:00 AM
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Latest Economic Developments and BI Measures against COVID-19 (17 April 2020)

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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 (17/4) along with the policy measures instituted by Bank Indonesia as follows:

1.    Rupiah exchange rate stable and tend to appreciate
Rupiah today (17/4) is traded actively in the market, fluctuating around Rp15,480 - Rp15,515. Bank Indonesia considers Rupiah exchange rate is fundamentally “undervalued”, estimated stable and will appreciate to a level of Rp15,000 per US dollar by the end of 2020. A stable and appreciating Rupiah exchange rate indicates improving market confidence. These 4 factors below support the exchange rate stability:
a.   Domestic and foreign market actors have confidence because Bank Indonesia is always present in the market and institutes measures required to maintain exchange rate stability.
b.  The Market mechanism is working well, thereby reducing the need for stabilization measures by Bank Indonesia. It affects increase in reserve assets.
c.    For the last one week, especially 14-16 April 2020, foreign capital inflows amounting to Rp0.7 trillion (14/4), Rp0.2 trillion (15/4), Rp2 trillion (16/4), respectively, with the most inflow to SBN (Government Securities). Historically, from 2011-2019 in Indonesia, outflow is relatively small within a short period, followed by considerable inflow within a long period. Data shows the average SBN outflow is Rp29.2 trillion within 4 (four) months, followed by SBN inflow of Rp229.1 trillion within 21 months. It underlies the confidence that despite the current outflow attributable to COVID-19 impacts, Bank Indonesia is confident that after COVID-19 outbreak ends, more substantial inflow will occur in a longer period.
d.  The increasing confidence is supported by measures taken by different countries in the world, both in COVID-19 mitigation as well as fiscal and monetary stimulus, including in Indonesia. It is evident in the Government’s fiscal stimulus (increasing fiscal deficit), quantitative easing from Bank Indonesia and credit relaxation policy from Indonesian Financial Services Authority (OJK).

2.    Current account deficit in Q1 of 2020 lower than 1.5% of GDP. It is supported by 3 factors as follows:
a.   Trade balance improves. COVID-19 affects export drop due to the global demand slowdown, disrupted global supply chain, and low global commodity prices. However, import drops considerably due to the declining domestic production activities. Indonesia’s trade balance recorded a surplus of USD743.4 million in March 2020.  In such development, trade balance of Indonesia in Q1 of 2020 enjoyed a surplus of USD2.62 billion.
b.   Service trade deficit is also estimated lower, attributable to lower import transportation costs. Around 8% of import value is used for freight and insurance. The sharp drop of import affects the decreasing need for freight and insurance.
c.   Foreign exchange from tourism is far lower than the previous estimate, which is made only by calculating foreign exchange decrease from tourism in terms of incoming foreign tourists. However, in the development, traveling abroad restrictions, including for umrah, thereby reducing foreign exchange use from domestic tourists canceling their visits abroad. Foreign exchange decrease for incoming foreign tourists is around USD2 billion. Meanwhile, travel services payments decrease from domestic tourists canceling their visits abroad is around USD1.6 billion. 
Current trade deficit in Q2 and Q3 of 2020 is estimated low in line with COVID-19 impacts on economic activities, and it is estimated that throughout 2020 current trade deficit will turn low.

3.    Easing Policy Stance of Bank Indonesia.
In the Board of Governors Meeting in April 2020, Bank Indonesia maintains BI-7DRRR because the rate has been decreased twice and the priority to maintain exchange rate stability is sustained. However, Bank Indonesia perceives adequate space to lower the policy rate due to mild inflationary pressures and the urgent need to stimulate economic growth.  The policies adopted by Bank Indonesia are quantitative easing, macroprudential policy relaxation, and acceleration of digital payment system.
O Effective from 1 May 2020, Rupiah reserve requirement ratios (RR) for Conventional Commercial Banks (CCB) drops by 200 bps or 2%, which will add liquidity by Rp102trillion. In addition, Bank Indonesia does not apply mandatory additional reserve requirement to fulfill Macroprudential Intermediation Ratio (MIR) for CCB and Islamic Banks/Islamic Business Units (IB/IBU) for a period of 1 (one) year, which will add liquidity by Rp15.8 trillion.  In total, quantitative easing by Bank Indonesia almost reaches Rp420 trillion.
At the same time, Bank Indonesia strengthens bank liquidity management by increasing mandatory Macroprudential Liquidity Buffer Ratio (MLB) by 200 bps for CCB through purchase of Sovereign Debt Securities/Government Islamic securities (SBSN) to be issued by the Government in the primary market. It will add bank liquidity and support the need for fiscal financing and in line with quantitative easing by Bank Indonesia.  If a bank needs liquidity, it can sell SBN with repo to Bank Indonesia.

4.   SBN purchase mechanism in the primary market by BI as the last resort will refer to the principle where the Government will first maximize existing fund sources, such as budget surplus, endowment fund, as well as ADB and World Bank loans. The Government will then issue SBN. Bank Indonesia will purchase the SBN if it is not absorbed by the market.
Bank Indonesia estimates inflation in April-May 2020 during Ramadhan and Eid al-Fitr will be lower than the historical pattern. These 4 factors below underlie such estimate:
1.   Consumption demand will be lower in connection with Large-Scale Social Distancing in different areas.  It will reduce social mobility and result in decreasing physical activities and thereby reducing consumption pattern.
2.    The Government will ensure basic supplies, including through the role of Inflation Control Team/Regional Inflation Control Team (TPI/TPID).
3.    Slowing economic activities, resulting in low expected inflation.
4.   Exchange rate is stable with low commodity prices, making exchange rate pass through and imported inflation low.

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.

​​​Contact Center BICARA : 1500-131 e-mail :
Working hours: Monday to Friday, 08.00-16.00 West Indonesia Time
Halaman ini terakhir diperbarui 9/21/2020 8:58 PM
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