No. 22/87/DKom
The BI Board
of Governors agreed on 18th and 19th November 2020 to lower the BI 7-day
Reverse Repo Rate by 25 bps to 3.75%, Deposit Facility (DF) rate by 25 bps to
3.00% and Lending Facility (LF) rate by 25 bps to 4.50%. The
decision is based on projected low inflation, maintained external stability as
well as follow-up policy measures to expedite the national economic recovery. Bank Indonesia remains firmly committed to providing
liquidity, including support for the Government in terms of accelerating state
budget realisation in 2020. In addition
to the latest decision, Bank Indonesia has also implemented the following
measures:
1. Maintaining
rupiah exchange rate stabilisation policy in line with the currency's
fundamental value and market mechanisms.
2. Strengthening
the monetary operations strategy in order to reinforce the accommodative
monetary policy stance.
3. Accelerating
foreign exchange market deepening by strengthening the domestic non-deliverable
forwards (DNDF) market in order to increase liquidity, while deepening the
financial markets as part of the Money Market Development Blueprint 2025.
4. Maintaining
an accommodative macroprudential policy stance by holding the countercyclical
buffer (CCB) at 0%, the Macroprudential Intermediation Ratio (MIR) in the
84-94% range with a 0% disincentive parameter, the Macroprudential Liquidity
Buffer (MPLB) at 6% with 6% repo flexibility, and the Loan-to-Value or
Financing-to-Value (LTV/FTV) ratios on property loans/financing in line with
prevailing regulations.
5. Strengthening
macroprudential policy to stimulate inclusive financing, in particular for
small and medium enterprises (SMEs).
6. Strengthening
payment system digitalisation in order to build economic recovery momentum
through several digital transformation initiatives, including:
a. Expanding
access for SMEs and the public to digital economic and financial services with
the broad support of collaboration between the banking industry and FinTech
throughout Indonesia.
b. Expanding
digital acceptance regionally by strengthening financial electronification
policy synergy with all local governments and promoting broader acceptance of
digital payments through the Quick Response Code Indonesia Standard (QRIS)
campaign in all regions of Indonesia.
7. Supporting
the economic recovery through the following payment system policies:
a. Extending
the period of lower service fees for the National Clearing System (SKNBI), as
well as the lower payment limit and late payment fees for credit cards.
b. Reducing
service fees for the Bank Indonesia – Real Time Gross Settlement (BI-RTGS)
system.
Bank Indonesia will continue to monitor global economic and
financial market dynamics as well as COVID-19 transmission and its impact on
the economic outlook for Indonesia over time in order to determine the
follow-up policy measures required to accelerate the national economic recovery
program. Furthermore, close policy
coordination with the Government and Financial System Stability Committee will
constantly be strengthened in order to maintain macroeconomic and financial
system stability, while expediting the national economic recovery.
Global economic improvements have continued after recording
stronger growth in the third quarter of 2020. Economic growth began to regain upward
momentum in many countries during the third quarter of 2020 on the back of increasing
mobility and policy stimuli. Positive
economic growth was recorded in China, while economic gains in the United
States, European Union and Japan exceeded preliminary projections. Several early indicators in October 2020
pointed to ongoing global economic improvements, as reflected by increasing
public mobility, further expansion of the manufacturing and services PMI in the
United States and China, as well as growing consumer and business confidence in
the United States and Europe. The global
economic gains are expected to endure in line with increasing public mobility
and ongoing policy stimuli. Stronger
global economic performance has raised world trade volume and international
commodity prices beyond previous projections.
Meanwhile, global financial market uncertainty has eased due to positive
expectations concerning the global economic outlook together with less
uncertainty surrounding the recent US election.
Such developments have boosted capital flows to developing economies and
strengthened currencies in various countries, including Indonesia.
At home, domestic economic growth is rebounding in line
with increasing fiscal stimulus realisation and greater public mobility
together with stronger global demand. Economic growth in Indonesia rebounded to
5.05% (qtq) in the third quarter of 2020 after contracting 4.19% (qtq) in the
previous period, thereby reducing the contraction annually to 3.49% (yoy) from
5.32% (yoy). Higher stimulus realisation
and greater public mobility have gradually increased domestic demand in terms
of consumption and investment.
Meanwhile, export performance has also improved on the back of global
demand, in the United States and China in particular. Ongoing domestic economic gains were also
confirmed by positive developments in a number of indicators during October
2020, including public mobility, non-food and online retail sales,
manufacturing PMI and private income.
Bank Indonesia expects economic growth to continue accelerating in 2021
in line with further global economic improvements, faster realisation of the
central and local government budgets, progress in terms of the loan
restructuring program as well as ongoing monetary and macroprudential stimuli
issued by Bank Indonesia. Through its
policy mix, Bank Indonesia will continue to strengthen synergy with the
Government and other relevant authorities to ensure the various policies taken
are effective in stimulating economic recovery.
Indonesia’s Balance of Payments (BOP) remains solid, thus
reinforcing external sector resilience. The
BOP is predicted to record a surplus in the third quarter of 2020 as the
capital and financial account returns to a surplus coupled with further current
account improvements. The trade surplus
has also increased in line with strong export performance on the global
economic recovery coupled with a rebalancing of imports as a corollary of muted
domestic demand. Meanwhile, the capital
and financial account surplus was driven by maintained foreign capital inflows
due to abundant global liquidity, highly attractive domestic financial assets
for investment as well as maintained investor confidence in the domestic
economic outlook. The positive
developments persisted in October 2020, supported by a USD3.61 billion trade
surplus and sustained foreign capital inflows.
During the period from October until 16th November 2020,
portfolio investment recorded a net inflow totalling USD3.68 billion. The position of reserve assets in Indonesia
at the end of October 2020 remained high at USD133.7 billion, equivalent to 9.7
months of imports or 9.3 months of imports and servicing government external
debt, which is well above the international adequacy standard of three
months. Bank Indonesia projects a low
current account deficit in 2020 at below 1.5% of GDP, which is also expected to
remain under control in 2021, bolstered by external sector resilience.
Consistent with Bank Indonesia’s stabilisation measures and
maintained foreign capital inflows to domestic financial markets, the rupiah is
appreciating. As of 18th November 2020, the
rupiah had appreciated 3.94% (ptp) on the October 2020 level, thus extending
the 1.74% (ptp) gain recorded one month earlier or 0.67% on the average
September 2020 level. The value of the
rupiah strengthened on increasing foreign capital inflows to domestic financial
markets in line with lower global financial market uncertainty and positive
investor perception regarding the promising domestic economic outlook. As of 18th November 2020,
therefore, the rupiah had recorded 1.33% (ytd) depreciation compared with the
level at the end of 2019. Looking ahead,
Bank Indonesia still expects the rupiah to regain lost value as the currency is
still fundamentally undervalued, supported by a narrow current account deficit,
low and stable inflation, attractive domestic financial assets for investment,
a lower risk premium in Indonesia as well as abundant global liquidity. Bank Indonesia will continue to hone rupiah
exchange rate stabilisation policy in line with the currency's fundamental
value and market mechanisms through effective monetary operations and by
providing market liquidity.
Inflation remains low on weak domestic demand and adequate
supply. In October
2020, the Consumer Price Index (CPI) stood at 0.07% (mtm), thus bringing CPI
inflation for the year to 0.95% (ytd) or 1.44% (yoy) annually, up slightly from
1.42% (yoy) in September 2020.
Furthermore, compressed domestic demand, policy consistency by Bank
Indonesia to anchor inflation expectations to the target corridor, low
international commodity prices and maintained exchange rate stability fed
through to lower core inflation in the reporting period. In terms of administered prices, mild inflationary
pressures stemmed from lower electricity rates and further decreases to
airfares. In contrast, volatile foods
experienced a build-up of inflationary pressures as a result of seasonal
factors triggered by higher horticultural prices in the wake of the harvesting
season. Bank Indonesia projects headline
inflation in 2020 below the lower bound of the target corridor before returning
to the target range of 3.0%±1% in 2021. Bank Indonesia consistently maintains
price stability and strengthens policy coordination with the central and local
government to control inflation within the predetermined target.
In line with Bank Indonesia's accommodative monetary and
macroprudential policy stance, liquidity conditions remain loose, prompting
lower interest rates and stimulating economic financing.
As of 17th November 2020, Bank Indonesia had injected around
Rp680.89 trillion of additional liquidity through quantitative easing into the
banking system, primarily in the form of lower reserve requirements totalling
Rp155 trillion and monetary expansion totalling Rp510.09 trillion. Loose
liquidity conditions maintained a high ratio of liquid assets to deposits in
October 2020 at 30.65%, coupled with a low overnight interbank rate of 3.29% in
the reporting period. Loose liquidity and BI 7-Day (Reverse) Repo Rate
reductions have contributed to lower deposit and lending rates from 5.18% and
9.44% in September 2020 to 4.93% and 9.38% respectively in October 2020. Furthermore,
the benchmark 10-year SBN yield decreased from 6.58% at the end of October 2020
to 6.13% as of 18th November 2020. In terms of monetary aggregates,
M1 and M2 growth accelerated in October 2020 to 18.5% (yoy) and 12.5% (yoy)
respectively. Moving forward, monetary expansion by Bank Indonesia together
with faster budget realisation and bank loan restructuring are expected to
stimulate lending for the national economic recovery.
Bank Indonesia will strengthen monetary expansion synergy
with fiscal stimuli by the Government in order to build national economic
recovery momentum. Bank Indonesia continues its commitment
to funding the 2020 state budget through SBN purchases in the primary market in
accordance with Act No. 2 of 2020, through market mechanisms and private
placement, as part of the efforts to accelerate the national economic recovery
program, while maintaining macroeconomic stability. As of 17th
November 2020, Bank Indonesia had purchased Rp72.49 trillion worth of SBN in
the primary market through market mechanisms pursuant to the Joint Decree of
the Minister of Finance and Governor of Bank Indonesia issued on 16th
April 2020, including auction schemes, greenshoe options (GSO) and private
placement. Meanwhile, funding realisation and burden sharing to fund public
goods in the state budget by Bank Indonesia through private placement in
accordance with the Joint Decree of the Minister of Finance and Governor of
Bank Indonesia issued on 7th July 2020 currently stand at Rp270.03
trillion. In addition, Bank Indonesia has also realised burden sharing with the
Government to fund non-public goods-SME totalling Rp114.81 trillion pursuant to
the Joint Decree of the Minister of Finance and Governor of Bank Indonesia
issued on 7th July 2020. Through such synergy, the Government can
focus on accelerating state budget realisation in order to drive national
economic recovery momentum.
Financial system stability remains solid, although the
risks associated with COVID-19 transmission on financial system stability
continue to demand vigilance. The Capital Adequacy
Ratio (CAR) remained high in the third quarter of 2020 at 23.41%, accompanied
by persistently low NPL ratios of 3.15% (gross) and 1.07% (nett).
Notwithstanding, the intermediation function of the financial sector remains
weak in line with compressed domestic demand and a selective
banking industry, cautious because of the pandemic. Growth of outstanding loans disbursed by the
banking industry stood at 0.12% (yoy) in the third quarter of 2020, with
deposit growth of 12.88% (yoy). The
latest developments point to a 0.47% (yoy) credit contraction in October 2020,
with deposit growth of 12.12% (yoy). Moving forward, the bank intermediation
function is expected to improve in line with the promising domestic economic
recovery outlook. Corporate performance is
improving, as confirmed by increasing sales and repayment capacity in most
sectors in the third quarter of 2020, which is expected to continue as the
domestic and global economies gain momentum. Bank Indonesia will maintain an accommodative
macroprudential policy stance, while continuously strengthening policy synergy
and coordination with the Government and other relevant authorities to restore
the bank intermediation function and stimulate economic recovery.
Cash and non-cash payment system transactions are
increasing in line with the economic recovery, accompanied by rapid economic
and financial digitalisation. Growth of currency in
circulation accelerated from 7.20% (yoy) in September 2020 to 14.61% (yoy) in
October 2020, reaching Rp806.8 trillion. Similarly, transaction value using
ATM, debit cards and credit cards recorded a shallower 3.97% (yoy) contraction
in October 2020 compared with a 5.58% (yoy) contraction in September 2020. On
the other hand, digital economy and finance transactions are proliferating
rapidly in line with greater use of digital platforms and instruments during
the pandemic, together with a shift in public preference and greater public
acceptance of digital transactions. Growth of transaction value using
electronic money remained positive in Octoberds 2020 at 14.80% (yoy). In terms
of digital banking, transaction value growth also remained positive at 10.50%
(yoy) in September 2020. Moving forward, Bank Indonesia acknowledges the
importance of accelerating the current payment digitalisation trend through
faster implementation of the Payment System Blueprint 2025 as well as expansion
of financial electronification centrally and regionally. Furthermore, Bank Indonesia will orient
payment system policy towards strengthening economic recovery momentum by
reducing payment infrastructure service fees and strengthening digital
transformation through stronger bank collaboration with FinTech, and by
expanding digital acceptance in all regions of the Indonesian archipelago.
Head of Communication Department
Onny Widjanarko
Executive Director
Information on Bank Indonesia
Tel. 021-131, email: bicara@bi.go.id
