BI Rate Maintained at 5.75% - Bank Sentral Republik Indonesia
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May 22, 2019
No. 14/ 45 / DPSHM / Humas

In the Board of Governors' Meeting convened on December 11 2012, Bank Indonesia decided to hold the BI rate steady at 5.75%. The current policy rate is considered consistent with inflation forecast, which is expected to remain low and contained within its target range of 4.5%±1% in 2013 and 2014. Evaluation on the economic performance in 2012 and the prospects of the economy in 2013-2014 broadly suggests that Indonesia’s economic growth remains sound with maintained stability. Going forward, Board of Governors remains vigilant on some risk factors from the global economy, and will strengthen policies to manage external balance to a sustainable level while also providing support for economic growth. Bank Indonesia believes that the implementation of policy mix between monetary and macroprudential policies, together with strengthen coordination with the Government will be able to maintain macroeconomic stability and sustainable economic growth.

Board of Governors sees that global economic growth slows in 2012, relative to the previous year. Economic growth in the Euro area remains in negative territory, triggered by prolonged crisis. In addition, amidst concern over fiscal cliff issue, U.S economic growth remains sound. In the Asian region, China and India, as Indonesia’s main trading partner, also witness lower pace of growth. Sluggish global economic growth, together with a sharp fall in commodity prices has triggered a moderation in global inflationary pressure. Under that condition, authorities in the advance and some emerging countries have opted to take a more accomodative stance. In 2013 and 2014, global economic growth is expected to improve and lead to a raise in commodity prices.

Board of Governors sees Indonesia’s economic growth in 2012 remains sound. In the Q4-2012, Indonesia’s economic growth is expected to be around 6.2% and bring the full-year growth to around 6.3%. The economic growth is underpinned by buoyant domestic demand, mainly in the form of private consumptions and investment, while a slowdown in exports continues. Going forward, Indonesia’s economic growth is expected to pick up, buoyed by strong domestic demand and better exports performance along with improvement in the global economy as well as higher international commodity prices. Other factors supporting higher growth in 2013 are higher domestic economic activity related to the preparation of General Election as well as better purchasing power. In addition, investment is expected to remain strong in line with better investment climate and optimism on the fundamental and prospects of the Indonesia’s economy.

Balance of Payment, which posted a deficit in the Q1 and Q2-2012, had turned to surplus in the Q3-2012 and is expected to chart higher surplus in the Q4-2012. Current account deficit continue to trend downward towards its sustainable level, albeit slower than expected. However, higher surplus in the capital and financial account, driven by FDI and portfolio investment, is expected to counterbalance the deficit in the current account. At the end of November 2012, international reserves edged up and reached USD111.3 billion, or equivalent to 6.1 months of imports and government’s external debt services. Going forward, Bank Indonesia believes that Balanceof Payments will remain in surplus, supported by narrowing current account deficit towards it sustainable level, as well as surplus in the capital and financial account which also expected to remain high.

Rupiah depreciated in the Q2 and Q3-2012 and has stabilized in the Q4-2012. Depreciation pressures during the Q2 and Q3-2012 were triggered by uncertainty in the global economy as well as pressures on Balance of Payments. In the Q4-2012, the depreciation pressures have subdued and Rupiah has stabilized, consistent with Bank Indonesia’s policy to stabilize rupiah as suggested by its fundamental. On point-to-point basis, in November 2012 Rupiah appreciated by 0.12% (mtm) to Rp9,594 per USD, or on average depreciated by 0.25% (mtm) to Rp9,617 per USD. Going forward, rupiah is expected to remain stable suported by Balance of Payments which is expected to remain in surplus.

Inflation remained contained and at the end of 2012 is expected to arrive below the mid-point of the target range of 4.5%±1%. This is supported by the implementation of monetary and macroprudential policy mix, as well as policy coordination with the Government through national inflation control team (TPI) and regional inflation control team (TPID). CPI inflation in November 2012 was recorded at 0.07% (mtm) or on an annual basis was recorded at 4.32% (yoy). In addition to low inflation in volatile food and administered prices category, core inflation was also contained, driven by subdued imported inflation in line with declining global food and energy prices, relatively stable rupiah, well-anchored inflation expectation, and better supply side response. Going forward, Bank Indonesia believes that inflation will remain contained and stay within its target range of 4.5%±1% in 2013 and 2014.

Financial system stability is well-maintained with intermediation function remains supportive to economic financing. Banking industry shows solid performance, as indicated by secured level of capital in which capital adequacy ratio (CAR) is well above minimum level of 8%, and gross non-performing loan (NPL) below 5%. Credit growth in October 2012 reached 22.8% (yoy). The credit growth is slightly lower than that in earlier month of 22.9% (yoy), driven by lower growth in consumption credit of 18.9% (yoy). Working capital credit grew by 22.0% (yoy), while investment credit recorded a high growth of 30.3% (yoy), and is expected to boost Indonesia’s economic capacity. Going forward, Bank Indonesia believes that financial stability will be maintained with improvement in the banking intermediary function in line with better Indonesia’s economic performance.

A complete report of the November 2012 Board of Governors’ Meeting, presenting macroeconomic developments and monetary policy will be published in the Monetary Policy Report (MPR). This publication is accessible through Bank Indonesia’s website.

Jakarta, 11 Desember 2012
Office of the Governor

Dody Budi Waluyo
Executive Director

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