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Against a backdrop of global economic moderation and high uncertainty, the national economy in Indonesia has remained resilient with a promising outlook. Bank Indonesia projects economic growth to reach 4.7-5.5% in 2024 before accelerating to 4.8-5.6% in 2025. Inflation will remain under control within the 2.5%±1% target corridor in 2024 and 2025, underpinned by consistent monetary policy, fiscal policy and the National Movement for Food Inflation Control (GNPIP). External and financial system stability will be maintained, accompanied by rapid digitalisation. Some of the global challenges that demand vigilance moving forward include global economic moderation and polarisation in the sources of global economic growth, a prolonged disinflation process, higher for longer policy rates in advanced economies, a strong US dollar as well as massive capital outflows from emerging markets to advanced economies. Synergy, therefore, is key for maintaining domestic economic resilience and revival. That was the main takeaway delivered by the Governor of Bank Indonesia, Perry Warjiyo, at the hybrid Bank Indonesia Annual Gathering (PTBI) 2023 in Jakarta on 29th November 2023.
The President of the Republic of Indonesia, Joko Widodo, took the opportunity to express his utmost appreciation for the synergy that has been built to ensure the national economic recovery process remains intact and the Indonesian economy enjoys stability. Moving forward, President Joko Widodo reiterated the importance of remaining optimistic yet vigilant to safeguard national economic resilience and revival. Supporting sustainable economic momentum, downstreaming strategies to increase value added are the backbone of the national economy.
The domestic economic outlook for 2024-2025 is promising despite increasing global uncertainty. Rupiah stability will be maintained in 2024 and Indonesia's Balance of Payments (BOP) will bolster external stability in line with the manageable current account deficit forecast in the range of a 0.1-0.9% deficit of GDP in 2024 and a 0.5-1.3% deficit of GDP in 2025. Bank lending/financing will continue improving, with credit growth expected to accelerate in the range of 10-12% in 2024 and 11-13% in 2025. Digital economic and financial transactions will maintain solid growth, supported by a modern, secure, uninterrupted and reliable payment system. The value of digital banking transactions in 2024 is projected at Rp71,584 trillion, with 23.2% growth expected and 18.8% in 2025 to reach Rp85,044 trillion. E-commerce transactions will also increase 2.8% to reach Rp487 trillion in 2024 and 3.3% to Rp503 trillion in 2025.
In the face of increasing global uncertainty as well as national economic and financial cycles below potential economic capacity, the Bank Indonesia policy mix will remain oriented towards maintaining stability and supporting sustainable economic growth. The policy mix is implemented in synergy with national economic policy and in accordance with the mandates of the Bank Indonesia Act and Financial Sector Development and Strengthening Act (P2SK Act). Monetary policy in 2024 will still be oriented towards maintaining stability (pro-stability), specifically the inflation target and rupiah stability. Meanwhile, macroprudential policy, payment system policy, money market deepening policy and inclusive and green economy and finance policy will be directed towards supporting sustainable economic growth (pro-growth). The Bank Indonesia policy mix is recapitulated as follows:
1. Monetary PolicyBank Indonesia monetary policy in 2024 will focus on achieving the inflation target and rupiah stability to ensure the global turmoil cannot impact national economic growth and stability. Pro-stability monetary policy will be instituted with forward-looking and pre-emptive interest rate policy to achieve the inflation target set by the Government, rupiah stability to remain in line with achieving the inflation target and support external stability, bolstered by pro-market monetary operations to strengthen the effectiveness of Bank Indonesia policy transmission to the financial markets and economy, which includes attracting portfolio inflows, as well as managing capital flows in accordance with international rules to preserve external stability and maintain adequate reserve assets.
2. Macroprudential Policy Bank Indonesia will maintain an accommodative macroprudential policy stance in 2024 to revive bank lending and financing optimally, while maintaining financial system stability (FSS). Accommodative macroprudential policy will be implemented through three main instruments as follows: (i) increasing the effectiveness of Macroprudential Liquidity Incentives Policy (KLM) and loosening the other macroprudential policy instruments, (ii) loosening liquidity conditions by reducing the Macroprudential Liquidity Buffer (MPLB), and (iii) strengthening FSS surveillance.
3. Payment System PolicyPayment system policy will continue accelerating the national digital economy and finance in accordance with the Indonesia Payment System Blueprint (BSPI) 2025, a healthy and efficient industry infrastructure as well as reliable and secure infrastructure, with a focus on five programs as follows: (i) developing the retail payment system by strengthening 3i (integration, interoperability, interconnectedness) between the BI-FAST system and National Payment Gateway (NPG), (ii) developing a modern, multicurrency, third-generation wholesale payment system (BI-RTGS) based on international standards, interconnected with a modernised Bank Indonesia MO system, (iii) developing a datacentre for payment transactions, supported by innovation and artificial intelligence, (iv) developing the Digital Rupiah as the only digital legal tender in Indonesia, and (v) expanding bilateral cross-border retail payment system linkages through QRIS and BI-FAST with ASEAN member states and several other countries in the Asian region.
4. Money Market and Foreign Exchange Market Deepening Policy
Money market deepening policy will remain oriented towards creating a modern money market based on international standards, while strengthening the transmission effectiveness of the Bank Indonesia policy mix and supporting financing for sustainable economic growth. Money market and foreign exchange market deepening policy in 2024, therefore, will focus on 4 (four) flagship programs as follows: (i) product development to increase volume and liquidity in the money market and foreign exchange market, (ii) strengthening efficient market mechanisms in the formation of the interest rate and exchange rate structure, (iii) strengthening market participant consolidation through the establishment of primary dealers (PD) and the formation of the Indonesia Money Market and Foreign Exchange Market Association (APUVINDO), and (iv) developing an Interest Rate and Exchange Rate Central Counterparty (CCP SBNT) with the industry.
5. Inclusive and Green Economic-Financial Policy
Bank Indonesia will continue strengthening synergy to accelerate development of the inclusive and green economy and finance, which includes MSME empowerment to strengthen national economic resilience and revival. Bank Indonesia aims to increase MSME productivity through the development of food sector MSMEs, which is in line with the National Movement for Food Inflation Control (GNPIP), transformation that allows MSMEs to level up through the development of export MSMEs and green MSMEs, as well as the expansion and strengthening of the MSME digitalisation program that not only encourages MSMEs to join the digital ecosystem but also develops digital creative MSMEs.
The five directions of BI policy are strengthened through synergy between Bank Indonesia and the Government to maintain macroeconomic stability and support national economic growth. Policy synergy is also strengthened through the Central and Regional Inflation Control Teams (TPIP and TPID), National Movement for Food Inflation Control (GNPIP) in various regions, as well as Accelerating and Expanding the Electronification of Central and Regional Government Transactions (P2DD). Furthermore, policy synergy between Bank Indonesia and the Financial System Stability Committee (KSSK) to maintain the stability of the financial system and revive bank lending/financing to businesses will also be strengthened.
As part of the Annual Gathering, Bank Indonesia also presented the Bank Indonesia Awards in 2023 to 64 strategic partners from the banking industry, corporate sector and individuals as a form of appreciation and national recognition for supporting BI task implementation in 2023 (Appendix). The awards also reflect the synergy built between Bank Indonesia and its strategic partners in conjunction with the Government, Financial Services Authority (OJK) and Indonesia Deposit Insurance Corporation (IDIC) to strengthen national economic resilience and revival.
The Bank Indonesia Annual Gathering is a strategic forum hosted at the end of each year to deliver Bank Indonesia's perspective on the latest economic conditions, challenges, prospects and direction of the Bank Indonesia policy mix, while receiving instructions from the President of the Republic of Indonesia. The Annual Gathering in 2023 was attended by the President of the Republic of Indonesia, Joko Widodo, leaders and members of the DPR and DPD RI, leaders of state institutions, ambassadors, ministers of the Onward Indonesian Cabinet, the chairman and members of the OJK and LPS Board of Commissioners, regional governors, leaders of the national banking industry, corporate sector and media as well as representatives from international organisations. Members of the public can follow the Bank Indonesia Annual Gathering series of activities through live broadcasts on Bank Indonesia social media channels as well as Bank Indonesia representative offices throughout Indonesia and abroad.
The remarks of the Governor of Bank Indonesia delivered at the Annual Gathering in 2023 are available in full via the following link.
Jakarta, 29th November 2023
Bank Indonesia's Annual Meeting 2023 - Economic Prospect & Policy Directions 2024.pdf
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Indonesia’s Balance of Payments Records Surplus in Q4/2023, External Sector Resilience Maintained
BI-Rate Held at 6,00%: Synergy Maintaining Stability and Reviving Growth