No.
22/87/DKom
The BI Board
of Governors agreed on 16th and 17th December 2020 to hold the BI 7-Day Reverse
Repo Rate at 3.75%, while also maintaining the Deposit Facility (DF) rates at
3.00% and Lending Facility (LF) rates at 4.50%. The
decision is consistent with projected low inflation and maintained external
stability, coupled with efforts to support the economic recovery. Bank Indonesia has strengthened policy
synergy and supports the various follow-up policies to build national economic
recovery optimism through the gradual reopening of productive and safe economic
sectors, accelerating fiscal stimuli, increasing bank lending on the demand and
supply sides, maintaining monetary and macroprudential stimuli as well as
expediting economic and financial digitalisation. In addition to those policies, Bank Indonesia
has also implemented the following measures:
- Maintaining
rupiah exchange rate stabilisation policy in line with the currency's
fundamental value and market mechanisms.
- Strengthening
the monetary operations strategy to reinforce the accommodative monetary policy
stance.
- Strengthening
accommodative macroprudential policy to stimulate growth of loans/financing
allocated to priority sectors towards national economic recovery, while
maintaining financial system resilience.
- Promoting
lower lending rates through close supervision and public communication in
coordination with the Indonesian Financial Services Authority (OJK) in terms of
interest rate transparency in the banking industry.
- Strengthening
money market deepening by expanding underlying DNDF to boost liquidity and reinforce
JISDOR as a reference for exchange rate setting in the foreign exchange market.
- Strengthening
integrated bank supervision coordination between Bank Indonesia, the Indonesian
Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS) to
maintain financial system stability.
- Accelerating
digital transformation and synergy to strengthen economic recovery momentum
through robust payment system policy and faster implementation of the Indonesia
Payment System Blueprint 2025.
a. Extending
the 0% Merchant Discount Rate (MDR) on QRIS transactions for micro enterprises
until 31st March 2021.
b. Strengthening
and expanding electronification and digitalisation centrally and regionally in
synergy with the Central and Regional Governments as well as other relevant
authorities by forming a Regional Digitalisation Acceleration and Expansion
Team.
c. Promoting
technology innovation and utilisation as well as collaboration between the
banking and FinTech industries through faster implementation of Sandbox 2.0,
encompassing, among others, the
regulatory sandbox, industrial tests, innovation lab and start-ups
Going forward, Bank Indonesia will continue to direct all
policy instruments towards supporting the national economic recovery, while
controlling inflation as well as maintaining rupiah exchange rate stability and
financial system stability. 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,
as well as expedite the national economic recovery. The focus of policy coordination is oriented
towards overcoming supply and demand-side constraints in terms of bank lending
to priority sectors in order to support economic growth and the national
economic recovery.
Global economic improvements have endured and are projected
to accelerate in 2021. The global economic gains come amidst
increasing mobility and the impact of ongoing policy stimuli in various
countries, particularly the United States and China. Several early indicators in November 2020
pointed to ongoing global economic improvements. The upward Manufacturing and Services PMI
trends have persisted in the United States and China, consumer and business
confidence are growing in the United States, China and Europe, and unemployment
has fallen in many jurisdictions.
Consequently, the global economy is projected to grow at approximately
5.0% in 2021 after contracting 3.8% in 2020.
Moving forward, the speed of the global economic recovery will be
affected by the Covid-19 vaccine rollout, increasing mobility as well as
ongoing fiscal and monetary stimuli.
Stronger global economic performance will catalyse world trade volume
and raise international commodity prices in line with previous
projections. Meanwhile, global financial
market uncertainty is expected to dissipate due to the positive expectations
surrounding the global economic outlook in line with the availability of Covid-19
vaccines, abundant global liquidity, low interest rates and a weak US
dollar. Such developments will trigger a
surge of capital flows to developing economies, thus strengthening local
currencies, including in Indonesia.
At home, domestic economic growth is expected to gradually gain
momentum and accelerate in 2021. This was confirmed by several positive
indicators in November 2020, including increasing public mobility in several
regions, ongoing improvements in the Manufacturing PMI as well as stronger
consumer confidence and expectations concerning incomes, job availability and
business activity. Moving forward,
vaccinations and discipline in terms of implementing Covid-19 protocols are
prerequisites for the national economic recovery process. The promising domestic economic outlook is
also supported by various policy measures aimed at: (i) reopening productive
and safe sectors nationally and in each respective region; (ii) accelerating
fiscal stimuli; (iii) stimulating bank lending on the supply and demand sides;
(iv) maintaining monetary and macroprudential stimuli; and (v) accelerating
economic and financial digitalisation, particularly in terms of SME
development. Under such conditions, Bank
Indonesia expects national economic growth to regain positive momentum in the
fourth quarter of 2020, and recording -1% to -2% in 2020 before accelerating to
4.8-5.8% in 2021. Bank Indonesia will
continue to strengthen synergy with the Government and other relevant
authorities in order to implement the follow-up policy measures necessary to effectively
stimulate economic recovery.
Indonesia's Balance of Payments (BOP) remains solid, thus
reinforcing external sector resilience. A narrow current account deficit is predicted
on the back of a maintained goods trade surplus. The trade balance amassed a USD2.61 billion
surplus in November 2020 after maintaining a USD3.58 billion surplus the month
earlier. Meanwhile, foreign capital
inflows to domestic financial markets continued, with portfolio investment
recording a net inflow of USD2.54 billion in the period from October – 15th
December 2020. In addition, the position
of reserve assets remained high towards the end of November 2020 at USD133.6
billion, equivalent to 9.9 months of imports or 9.5 months of imports and
servicing government external debt, which is well above the international
adequacy standard of three months. Looking
ahead, Bank Indonesia projects a low current account deficit in 2020 at below
1.5% of GDP and approximately 1.0-2.0% of GDP in 2021, thereby supporting
external sector resilience in Indonesia.
Supported by Bank Indonesia’s stabilisation measures and
maintained foreign capital inflows to domestic financial markets, rupiah
exchange rates have been maintained. As of 16th December 2020, the
rupiah strengthened by 0.63% on average despite depreciating by 0.04% (ptp) on
the November 2020 level. A surge of
foreign capital inflows to domestic financial markets in line with lower global
financial market uncertainty and the positive perception of investors towards
the promising domestic economic outlook have fed through to a stronger rupiah. Therefore, the rupiah recorded 1.72% (ytd)
depreciation as of 16th December 2020 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
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
November 2020, the Consumer Price Index (CPI) stood at 0.28% (mtm) or 1.59%
(yoy) annually. Core inflation remains
low on compressed domestic demand, policy consistency by Bank Indonesia to
anchor inflation expectations to the target corridor as well as maintained
exchange rate stability. Meanwhile,
volatile food inflation has increased on seasonal factors due to rising
horticultural prices after the end of the harvesting season as well as rising
international commodity prices.
Inflationary pressures on administered prices also began to accumulate
in line with higher airfares despite deflationary pressures on electricity
rates in line with the Government’s tariff adjustments. Bank Indonesia projects 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 through inflation controlling team (TPI and
TPID) 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 15th December 2020, Bank Indonesia has injected around
Rp694.87 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 Rp524.07 trillion. Loose
liquidity conditions maintained a high ratio of liquid assets to deposits in
November 2020 at 31.52%, coupled with a low overnight interbank rate of 3.20%
in the reporting period. Loose liquidity and BI 7-Day (Reverse) Repo Rate reductions
have contributed to lower deposit and lending rates from 4.93% and 9.38% in
October 2020 to 4.74% and 9.32% respectively in November 2020. Lower lending rates are expected to persist
due to loose liquidity conditions and the low policy rate maintained by Bank
Indonesia. Furthermore, the benchmark 10-year SBN yield decreased from 6.16% at
the end of November 2020 to 6.07% as of 16th December 2020. In
terms of monetary aggregates, M1 and M2 growth remained high in November 2020 at
15.8% (yoy) and 12.2% (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 15th December
2020, Bank Indonesia had purchased Rp75.86 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
2020 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 Rp397.56
trillion. Overall, therefore, Bank
Indonesia has purchased SBN for funding and burden sharing in the 2020 state
budget for the national economic recovery program totalling Rp473.42 trillion. In
addition, Bank Indonesia has also realised burden sharing with the Government
to fund non-public goods-SME totalling Rp114.81 trillion and non-public
goods-corporate totalling Rp62.22 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 October 2020 at 23.70%,
accompanied by persistently low NPL ratios of 3.15% (gross) and 1.03% (nett).
Notwithstanding, the intermediation function of the financial sector remains
weak, as reflected by a 1.39% (yoy) credit contraction in the reporting period,
coupled with 11.55% (yoy) deposit growth. Bank Indonesia is confident that low
credit growth stems from weak corporate demand on the demand side and high risk
perception in the banking industry on the supply side. New loan growth could
potentially accelerate in a number of sectors, including the food and beverages
industry, base metals industry as well as leather and footwear industry, in
addition to several priority sectors that support economic and export
growth. Corporate and SME performance have
improved in those sectors, as reflected by higher sales and repayment capacity.
Bank Indonesia will maintain an accommodative macroprudential policy stance,
while continuously strengthening policy synergy and coordination with the
Government, Financial System Stability Committee, banking industry and business
community to overcome the supply and demand-side constraints in terms of bank
lending to priority sectors.
Cash and non-cash payment system transactions are
increasing in line with the economic recovery, accompanied by rapid economic
and financial digitalisation.
In November 2020, currency in circulation grew 12.3% (yoy) to reach Rp804.9
trillion in line with increasing economic activity. Transaction value using
ATM, debit cards and credit cards recorded a shallower 1.93% (yoy) contraction
in November 2020 compared with a 3.97% (yoy) contraction in October 2020. On
the other hand, digital economy and finance transactions maintained positive
growth 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 November 2020 at 20.27% (yoy). Similarly, in terms of digital banking,
transaction volume and value growth also remained positive at 29.98% (yoy) and
2.11% (yoy) respectively in October 2020. Bank Indonesia expects the current payment
digitalisation trend to persist, supported by FinTech ecosystem
integration. Furthermore, Bank Indonesia
will orient payment system policy towards strengthening economic recovery
momentum, creating synergy with the Government and other relevant authorities and
expanding digital acceptance in all regions of the Indonesian archipelago.
Jakarta,
December 17th
2020
Head of Communication Department
Erwin Haryono
Executive Director
Information on Bank Indonesia
Tel. 021-131, email: bicara@bi.go.id