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4/22/2020 12:00 PM
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Latest Economic Developments and BI Measures against COVID-19 (22 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, discussed 3 (three) new developments on Wednesday (22/4) along with the policy measures instituted by Bank Indonesia as follows:

1.    Net portfolio investment inflows to Indonesia recorded Rp1.57 trillion.
Based on non-resident daily transaction data from 13-20 April 2020, foreign inflows to Government securities (SBN) was recorded at Rp4.37 trillion and outflows from stock market was recorded at Rp2.8 trillion, totaling net inflow of Rp1.57 trillion. It indicates that confidence in Indonesia, primarily investment in fixed income portfolio, is gradually increasing as boosted by:
a.   The attractive yield offered by the SBN, as measured by several indicators, such as yield spread of 7.1% or 713 bps between 10-year Indonesian Government’s bonds and 10-year US treasury, and real yield of 4.6% which is higher than India, Mexico, and other Asian countries.
b.   A risk premium indicator, financial market volatility index (VIX) stood at the level of 18.8 before COVID-19, while during the peak at around the second and third weeks of March 2020 stood at the level of 83.2; and the latest data shows that VIX stood at 43.8 which means global financial market panic is gradually subsiding.
Moving forward, high interest rate differentials, gradually improving risk premium, and policy measures instituted by Bank Indonesia, the government, and the relevant authority will increase attractiveness of portfolio investment in Indonesia and support Rupiah exchange rate stability.  Historically, from 2011-2019 in Indonesia, outflow is relatively small within a short period, followed by considerable inflow within a long period. Data shows average outflow is Rp29.2 trillion within a duration of 3-4 months, followed by inflow of Rp229.1 trillion within a duration of 21 months.

2.    Rupiah exchange rate stable and will appreciate to a level of Rp15,000 at the end of the year.
Rupiah exchange rate movement is affected by the following 2 factors:
a.    Fundamental factor will affect the direction of Rupiah exchange rate movement.
Fundamentally, Rupiah exchange rate remains undervalued  with low and controlled inflation at 3±1%, current deficit in Q1 will be lower than 1.5% of the GDP and overall in 2020 will be lower than 2% of the GDP, and policy measures instituted by Bank Indonesia, the government, and the relevant authority, including fiscal and monetary stimulus strengthen confidence in Indonesia.  
b.   Technical factors will affect daily movement of Rupiah exchange rate.
c.   The technical factors, among others are (global factors) the decreasing oil price, conflict between Russia and Saudi Arabia, and geopolitical issues, and (domestic factor) COVID-19 response measures including enforcement of large-scale social distancing (PSBB) in Indonesia.
In addition, share price index in Indonesia is not always moving following the global share price index. It indicates that investors start to pay positive attention to Indonesia.

3.    Inflation controlled and low.
The Price Monitoring Survey conducted by Bank Indonesia and 46 Bank Indonesia Representative Offices as of the third week of April 2020 shows that prices in the market are controlled and low. Inflation in April 2020 is estimated to stand at 0.22% (mtm) or 2.82% (yoy). Commodities contributing to the inflation are shallots, gold jewelries, and white sugar. Meanwhile, commodities contributing to deflation are red chilies, chicken meat, and eggs.
Inflation during Ramadhan and Eid al-Fitr is estimated lower than historical pattern due to these factors:
a.    April and May are harvest months, making supply of basic commodities sufficient for the public needs.
b.  Demands will also be lower due to COVID-19 pandemic, which results in lesser human activities due to mobility restrictions, PSBB, etc.
c.    Expected inflation is controlled.
d.    The policy measures taken to control inflation.
Bank Indonesia is confident that by the end of 2020, inflation will remain controlled at 3±1%.

Standard and Poor’s (S&P) revised outlook of Indonesia to negative on 17 April 2020. It reflects S&P’s expectation that ahead Indonesia will face external and fiscal risk increase due to the increasing offshore liabilities and debts of the Government to finance COVID-19 pandemic management. In relation thereto, Bank Indonesia observes that Indonesia’s external debt condition remains safe, controlled, and productive. Indonesia’s external debt as of the end of February 2020 amounted to USD407.5 billion, consisting of public external debts (government and central bank) of USD203.3 billion and private external debts (including SOE) of USD204.2 billion. Indonesia’s external debt is managed with the principle of prudence. For private sector, Bank Indonesia regulation obliges prudential principle in managing external debt, such as hedging and minimum rating.  Meanwhile, the Government’s plan to issue SBN for economic recovery and fiscal deficit financing due to COVID-19 pandemic will increase the quantity of issued SBN. However, it must be understood this year’s SBN outflow decreases foreign ownership from around 40% to 32%. On the other hand, SBN ownership by Bank Indonesia increases.
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.
 

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Halaman ini terakhir diperbarui 9/21/2020 8:58 PM
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