No.24/322/DKom
Despite persistent global economic turmoil, the Indonesian economy remains resilient with a promising outlook. Bank Indonesia projects solid national economic growth in Indonesia in 2023 in the 4.5-5.3% range before accelerating to 4.7-5.5% in 2024, underpinned by private consumption, investment and positive export performance against a backdrop of global economic moderation. Consumer Price Index (CPI) inflation is projected to track a downward trend and return to the 3.0%±1% target in 2023 and 2.5%±1% in 2024, with core inflation expected to return the target earlier, namely in the first half of 2023, in line with controlled imported inflation, a stable rupiah as well as a front-loaded, pre-emptive and forward-looking monetary policy response. Close policy coordination with the (central and regional) Government through the Central and Regional Inflation Control Teams (TPIP and TPID) and the National Movement for Food Inflation Control (GNPIP) will also contribute to managing inflation. Synergy and innovation are key to the economic outlook for Indonesia in 2023 and 2024, thus maintaining economic resilience and revival. That was the key takeaway of the Bank Indonesia Governor, Perry Warjiyo, delivered at the Bank Indonesia Annual Meeting (PTBI) 2022, held as a hybrid event in Jakarta (30/11).
The President of the Republic of Indonesia, Joko Widodo, took the opportunity to remark that, moving forward, global conditions are replete with uncertainty and difficult to predict. “In 2023, we must remain cautious and vigilant without losing optimism," added President Joko Widodo. With respect to policymaking, fiscal-monetary synergy must be constantly strengthened to ensure that national economic policy provides enormous benefits to the people and the country in terms of fostering national economic resilience and revival.
Seeking to maintain solid economic resilience that has been built over time, and in line with the remarks of the Indonesian President, the Bank Indonesia Governor emphasised synergy and innovation as key to facing the global turmoil. Optimism for the economic recovery must be strengthened while remaining vigilant of global spillovers and uncertainty, including the risk of stagflation (economic moderation and high inflation) and even resflation (economic recession and high inflation). This is in line with the looming risk of corrections to economic growth globally and in various jurisdictions that could occur if high political and economic fragmentation is allowed to persist, with monetary tightening thus requiring longer to lower inflation in each country.
External stability will be maintained, with a current account projected in the range of a 0.4% surplus - 0.4% deficit of GDP in 2023, followed by a 0.2% surplus - 0.6% deficit of GDP in 2024, while the capital and financial account surplus will be supported by foreign direct investment (FDI) and portfolio investment. Financial system resilience will be maintained in terms of capital, credit risk and liquidity. Credit growth is projected in the 10-12% range in 2023 and 2024. Meanwhile, the digital economy and finance will continue to increase in 2023 and 2024, with the value of e-commerce transactions expected to reach Rp572 trillion and Rp689 trillion respectively, electronic money transactions totalling Rp508 trillion and Rp640 trillion, and digital banking transactions predicted to exceed Rp67 thousand trillion and Rp87 thousand trillion.
In 2023, the Bank Indonesia policy mix will remain an integral part of the national policy mix to strengthen economic resilience, recovery and revival in Indonesia against a backdrop of global economic moderation and the risk of recession in various jurisdictions. A pro-stability monetary policy stance in 2023 will continue to focus on maintaining stability, while the four other policies of Bank Indonesia, namely macroprudential policy, payment system policy, money market deepening policy as well as inclusive and green economic-financial policy, will remain oriented towards accelerating the national economic recovery (pro-growth). Each policy is explained as follows:
1. Monetary Policy
BI monetary policy in 2023 will focus on rupiah stabilisation and inflation control to return inflation to the target range earlier as part of the measures to mitigate the impact of global spillovers, as well as support macroeconomic and financial system stability. Bank Indonesia will consistently continue a well-calibrated, well-planned and well-communicated interest rate policy response to ensure the core inflation target is achieved earlier, namely in the first semester of 2023. The magnitude and timing of the policy response will be based on inflation expectations and core inflation against initial projections and the targets to be achieved (data dependent).
2. Macroprudential Policy
Bank Indonesia will maintain an accommodative macroprudential policy stance to encourage bank lending and financing to priority sectors and MSMEs, thereby accelerating the national economic recovery and simultaneously maintaining financial system stability and developing a green and inclusive economic and finance.
3. Payment System Policy
Payment system digitalisation, in accordance with the Indonesia Payment System Blueprint (BSPI) 2025 based on 'One Language, One Nation, One Homeland', intends to accelerate digital economic and financial integration, develop cross-border payment system cooperation and develop the Rupiah Digital as per the stages outlined in the White Paper launched at PTBI 2022.
4. Money Market Deepening Policy
Money market and foreign exchange market deepening, will be accelerated in accordance with the Money Market Development Blueprint (BPPU) 2025 to strengthen policy transmission, develop modern and world-class money market infrastructure as well as financial instruments, including sustainable finance.
5. Inclusive and Green Economic-Financial Policy
Financial and economic inclusion programs targeting MSMEs will be expanded along with the sharia finance, including through digitalisation, and unlocking domestic and exports markets.
The five BI policies will be strengthened through close coordination with the (central and regional) Government and strategic partners, namely TPIP and TPID and GNPIP in various regions, to manage inflation. Policy synergy between Bank Indonesia and Government Fiscal Policy, as well as the Financial System Stability Committee (KSSK), will also be strengthened to maintain macroeconomic and financial system stability, while reviving lending/financing to businesses in priority sectors to support economic growth, exports, while increasing economic and financial inclusion. Bank Indonesia will also strengthen international financial cooperation with central banks and authorities in other partner countries, and promote trade and investment in priority sectors in synergy with relevant institutions. Close synergy will also be maintained with the Government to ensure the success of Indonesia's ASEAN Chairmanship in 2023, particularly in terms of the financial integration track.
At the Annual Meeting, Bank Indonesia also presented the Bank Indonesia Award to 58 strategic partners from the banking industry, corporate sector as well as individuals as a form of appreciation for their support in terms of BI task implementation in 2022 (Appendix). The award also reflects synergy between Bank Indonesia and strategic partners, in conjunction with the Government, OJK and IDIC, to accelerate the national economic recovery.
The Bank Indonesia Annual Meeting is a strategic forum held annually to deliver bank Indonesia's perspective on the latest economic dynamics, challenges and outlook as well as the orientation of the BI policy mix moving forward, with the President of the Republic of Indonesia also delivering his instructions and remarks. The Bank Indonesia Annual Meeting in 2022 was attended by the President of the Republic of Indonesia, Joko Widodo, leaders and members of the People's Representative Council (DPR) and Regional Representative Council (DPD), heads of state institutions, ambassadors, Onward Indonesia Cabinet ministers, the chairman and members of the OJK and IDIC Board of Commissioners, regional governors, leaders of the banking industry and corporate sector, academics, the national media and representatives of international organisations. Members of the public could also live stream the Bank Indonesia Annual Meeting through BI social media channels and Bank Indonesia Representative Offices throughout Indonesia and abroad.
The speech of the Governor of Bank Indonesia delivered at PTBI 2022 is available in full via the following link.
Jakarta, 30th November 2022
Head of Communication Department
Erwin Haryono
Executive Director
Information about Bank Indonesia
Tel. 021-131, Email: bicara@bi.go.id
Governor Speech
