Monitoring
economic conditions in Indonesia, especially in terms of the COVID-19 impact,
Bank Indonesia Governor, Perry Warjiyo, announced two recent developments on
Friday (05/06) concerning the latest economic indicators and policy measures
instituted by Bank Indonesia as follows:
A. Latest
Economic Indicators
1. The
rupiah remains fundamentally undervalued and is expected to appreciate.
The
rupiah today (05/06) broke through the Rp14,000 per US dollar level, trading at
Rp13,855 per US dollar to buy and Rp13,960 per dollar to sell. The stronger rupiah was consistent with prevailing
opinion that the currency is fundamentally undervalued and will continue to
strengthen moving forward, influenced by:
a. Low
and controlled inflation;
b. Narrow
current account deficit;
c. Wide
yield spread;
10-year SBN yield in
Indonesia is 7.06%, while 10-year UST Note yield is 0.8%, giving a yield spread
of 6.2%.
d. Indonesia’s
risk premium has begun to decrease but not to pre-COVID-19 levels.
Indonesia’s 5-year CDS premium
decreased to a level of 126.78bps on 4th June 2020 yet remains above
the 66-68bps range recorded prior to COVID-19.
Post pandemic, Indonesia’s CDS premium is expected to decline and
support rupiah appreciation.
2. Inflation
Remains Low
Low
Consumer Price Index (CPI) inflation was recorded in May 2020 at 0.07% (mtm),
or 2.19% (yoy) annually. Based
on the latest Price Monitoring Survey released in the first week of June 2020, lower
inflation in June is predicted at 0.04% (mtm), or 1.81% (yoy). Low inflation stems from:
a.
Slower demand due to the
COVID-19 pandemic, including private income and consumption.
b.
Uninterrupted supply and
smooth distribution of goods and services supported by close coordination
between Bank Indonesia and the central and local governments.
c.
Policy credibility, as
indicated by anchored inflation expectations.
3. Foreign
capital inflows have increased since the second week of May 2020.
Foreign
investor confidence in economic conditions in Indonesia is improving, signalled
by an influx of foreign capital flows to government securities (SBN) since the
second week of May 2020. Net inflows
totalling Rp2.97 trillion, Rp6.15 trillion, Rp2.5 trillion and Rp7.01 trillion
were recorded in the second, third and fourth weeks of May 2020 as well as the
first week of June 2020 respectively.
4. The
position of reserve assets increased at the end of May 2020.
The
position of reserve assets has continued to rise, with the position at the end
of May 2020 expected to exceed that recorded in April 2020.
5. SBN
purchases by Bank Indonesia in the primary market in accordance with Act No. 2
of 2020.
Bank
Indonesia has pared back SBN purchases in the primary market, thus
demonstrating stronger market capacity to purchase SBN and finance the State
Revenue and Expenditure Budget (APBN).
a. SBSN
purchases by Bank Indonesia
·
21-22 April 2020: Rp4.65 trillion
·
5-8 May 2020: Rp7.3 trillion, including private
placements totalling Rp3.67 trillion.
·
18 May 2020: Rp1.17 trillion
b. SUN
purchases by Bank Indonesia
·
28-29 April 2020: 9.07 trillion
·
12 May 2020: 1.77 trillion
·
First Week of June 2020: Rp2.09 trillion
B. BI
Measures to support New Normal Policy
1. Implement
and safeguard the central bank functions relating to the banking industry,
payment system and financial market, while cooperating with the industry to
ensure monetary, financial and payment system activities run smoothly and
securely to support economic activity.
2. Comply
with protocols put in place by the central and local governments. COVID-19 pandemic containment protocols are critical
from a humanitarian aspect and to support economic activity. The protocols are implemented in accordance
with the local requirements in each region.
3. Prepare
protocols for task implementation at Bank Indonesia and other relevant
industries. All essential tasks and
functions at Bank Indonesia will be maintained through a split operation
mechanism, while following strict health and hygiene protocols for the payment
system, currency in circulation, money market and foreign exchange market. For non-essential tasks, the number of
employees working from home or in the office will be adjusted gradually.
Bank
Indonesia is confident that implementation of the New Normal will stimulate
economic activity and increase private income.
National economic growth in Indonesia is expected to moderate in the
second quarter of 2020 before regaining upward momentum in the third quarter of
2020. Meanwhile, the economic growth
projection for Indonesia in 2020 will be reviewed based on the latest data
available.
Additionally,
Bank Indonesia will continue to strengthen coordination with the Government and
Indonesian Financial Services Authority (OJK) to carefully monitor the chain of
COVID-19 transmission and the economic impact over time, including the
coordinated policy measures required to maintain macroeconomic and financial
system stability, while supporting solid and resilient economic growth.
Head of Communication
Department
Onny
Widjanarko
Executive
Director
Information about Bank Indonesia
