Monitoring the latest
economic conditions in Indonesia, the impact of COVID-19 in particular, Bank
Indonesia Governor, Perry Warjiyo, announced 5 (five) latest developments on
Wednesday (29/4) along with the policy measures instituted by Bank Indonesia as
follows:
1.
Inflation controlled and
low
The Price Monitoring
Survey conducted by Bank Indonesia and 46 Bank Indonesia Representative Offices
as of the fourth week of April 2020 shows that prices in the market are
controlled and low. Inflation in April 2020 is estimated to stand at 0.18%
(mtm) or 2.78% (yoy). The inflation estimate in April 2020 is lower than inflation
in March 2020 which stood at 2.96% (yoy) and in February 2020 at 2.98% (yoy).
It confirms that by the end of 2020, inflation will remain controlled and low
at 3±1%.
The main contributors to
inflation in the reporting period among others are shallots (0.12%), gold
jewelries (0.09%), oranges (0.05%), and granulated sugar (0.02%). Meanwhile,
commodities contributing to deflation are red chilies (-0.11%) and non-breed
chicken meat (-0.08%) It shows the government’s commitment to maintain steady
supply and fulfillment of basic commodities.
Inflation
during Ramadan and Eid al-Fitr is estimated lower than its historical pattern
attributable to low demand as influenced by COVID-19 pandemic which results in
limited human activities due to mobility restrictions, large-scale social
distancing (PSBB), etc.
2.
Rupiah exchange rate
stable and will appreciate to a level of Rp15,000 at the end of the year
On Tuesday (28/4), rupiah was closed at a level of
Rp15,380, weaker by Rp70 than the day before at Rp15,310 (27/4). Exchange rate
movement is affected by technical factors, such as relatively high corporate
demand for foreign currency according to its historical pattern, and the
government’s measures to implement large scale social restrictions in different
areas, which some market actors perceive to decrease economic growth. In addition, Fitch rating agency predicts
Indonesia’s economic growth in 2020 will stand at 2.8% (yoy), lower than last
year but higher than Bank Indonesia’s estimate of 2.3% (yoy).
Meanwhile, several
positive factors influence exchange rate movement, namely high incoming bid of Government
Securities (SBN) auction amounting to Rp44.4 trillion. It indicates strong
interest of foreign and domestic investors in buying SBN. In addition, stronger
stock futures in the United States and Europe become a positive factor
influencing exchange rate movement.
Overall, rupiah exchange
rate moves steadily and will appreciate to a level of Rp15,000 at the end of
the year as supported by 4 factors:
a.
Fundamentally,
rupiah exchange rate remains undervalued as supported by current account
deficit in Quarter I which will be lower than 1.5% of GDP, and overall, in 2020
it will be lower than 2% of GDP. Such declining current account deficit means
foreign exchange shortage will be lower, thereby supporting stronger rupiah
exchange rate toward its fundamental value.
b.
Bank
Indonesia will always be in the market and take necessary measures to maintain
exchange rate stability.
c.
Foreign
capital inflow to Indonesia is estimated to increase. 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.
d.
Risk
premium is estimated to decrease after COVID-19 pandemic ends.
3.
BI’s participation in
buying SBN in the primary market
In yesterday’s
SBN auction (28/4), the government indicated an auction target of Rp20 trillion
with a maximum target of Rp40 trillion. According to the Memorandum of Understanding
between Bank Indonesia and the Ministry of Finance, SBN purchase in the primary
market by Bank Indonesia as a non-competitive bid amounts to 25% at the maximum
of the maximum target or around Rp10 trillion, but Bank Indonesia will
prioritize market actors, and therefore, only bid Rp7.5 trillion. The winning amount in SBN auction out of
Rp44.4 trillion is Rp16.6 trillion, where Rp2.3 trillion is for Bank Indonesia
and the remaining Rp14.3 trillion is won by the market.
According
to the memorandum of understanding, if SBN auction target is not reached, the
Government may implement a green shoe auction using the previous day’s price
(28/4), which is weighted average for 10-year SBN yield of 8.08% with an
auction target of Rp23.38 trillion. In implementation of additional auction,
Bank Indonesia may also bid at around Rp7.5 trillion. If the target cannot be achieved
after such additional auction, the government may use private placement to
banks or Bank Indonesia in the agreed
amount. The price used in private placement will refer to the latest on issued
by Indonesia Bond Pricing Agency (PHEI). Under such mechanism, fiscal deficit
financing can be fulfilled.
4.
Implementation of
quantitative easing policy of Rp503.8 trillion
Under the decision
of the Board of Governors meeting in April 2020, policy easing
adopted by Bank Indonesia among others includes quantitative easing. Until now, quantitative easing by
Bank Indonesia has amounted to Rp503.8 trillion, consisting of:
a.
In
January – April 2020, Rp386 trillion from SBN purchase in the secondary market
of Rp166.2 trillion, bank’s term repo
of Rp137.1 trillion, declining rupiah Reserve Requirements ratio (RR) in
January and April 2020 of Rp53 trillion, and foreign currency swap of Rp29.7
trillion.
b.
In
May 2020, Rp117.8 trillion from declining rupiah RR ratio of Rp102 trillion and
non-application of additional reserve requirement ratio to meet Macroprudential
Intermediation Ratio of Rp15.8 trillion.
Quantitative easing
policy will create effective impacts on the real sector with the support of
fiscal stimulus, among others through implementation of social safety net,
industrial incentive including people’s business loans (KUR), and other social
aid programs as well as credit restructuring support.
5.
Bank Indonesia Peduli
COVID-19 (Bank Indonesia Devotes
to Fight COVID-19)
In solidarity with and
care for people affected by COVID-19 and in support of COVID-19 pandemic
management, Bank Indonesia (BI) implements a movement called “Gerakan BI
Peduli COVID-19” or “Bank Indonesia Devotes to Fight COVID-19”. The
movement serves as an initiative of the board of Governors and employees of BI
who set aside some amount of their Lebaran allowance and salary for 6 (six)
months from May until October 2020. In addition, the movement includes
distribution of BI’s social support in Dedikasi untuk Negeri (Dedication to the Nation) program and
voluntary donation by employees from March 2020.
This movement is
estimated to raise a total fund of Rp101.4 billion to be distributed through
the Task Force for Acceleration of COVID-19 Handling, hospitals, and
community. The fund will be used among
others to buy personal protective equipment (PPE), masks, ventilators, body
temperature measurement instruments, vitamins, and basic food supplies.
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.
Head of Communication
Department
Onny Widjanarko
Executive Director
Information on Bank Indonesia
Phone: 021-131, Email: bicara@bi.go.id
