BI Rate Lowered 50 bps to 8.75% - Bank Sentral Republik Indonesia
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April 18, 2019

No. 11/ 1  /PSHM/Humas

In the Board of Governors’ Meeting convened today, Bank Indonesia decided to reduce the BI Rate by 50 bps to 8.75%. This decision was taken after a comprehensive evaluation of the current domestic and international economic and monetary conditions and the outlook for 2009.

“To counterbalance risks in 2009, the monetary policy stance should focus on efforts to promote economic growth while continuing to safeguard medium-term inflation and financial sector stability,” explained Bank Indonesia Governor Boediono.

Domestic inflationary pressure has steadily eased in recent months in response to falling world commodity, food and energy prices, high levels of domestic food production in 2008 and slowing of aggregate demand. December 2008 in fact recorded 0.04% deflation, bringing the overall rate of inflation for 2008 to 11.06%. During 2009, with continued support from these factors, inflation is predicted to ease to the 5%-7% range.

“Early indicators for the Indonesian economy in 2009 point to slowing expansion in some components of aggregate demand, led by exports and investment," added Boediono. Bank credit expansion has begun to taper off with lending growth down from 37.1% (yoy) in October 2008 to 30.2% (yoy) in the latest preliminary data for December 2008. This trend is predicted to carry forward into 2009 with credit expansion forecasted in the range of 18%-20%. In a similar vein, economic growth in 2009 is predicted to reach 4%-5%.

International reserves at end-December 2008 were recorded at USD 51.6 billion, equivalent to 4.0 months of imports and servicing of official foreign debt. In view of the situation on global markets, Indonesian exports are expected to weaken in 2009, while imports will also subside. Accordingly, the Current Account is predicted to chart a deficit at about 0.11% of GDP. At end-2009, international reserves are forecasted to reach USD 51 billion, equivalent to 4.7 months of imports and servicing of official foreign debt.

In 2009, the banking industry will inevitably bear the impact of the global financial crisis and world economic slowdown. Nevertheless, the overall banking industry will still retain considerable resilience, as reflected in the key CAR and NPL banking indicators. The capital adequacy ratio (CAR) will remain high despite dropping slightly to 14.3%. While NPLs are forecasted to mount, the expected level is still at about 5%.

A complete review of the deliberations of the Board of Governors’ Meeting for January 2009, presenting the latest economic conditions, monetary developments, inflation, exchange rate, condition of balance of payments and economic outlook, will be presented in the Bank Indonesia Monetary Policy Report. This report may be accessed on the Bank Indonesia website (http://www.bi.go.id) from 9 January 2009.

Jakarta, 7 January 2009
Directorate of Strategic Planning
and Public Relations


Dyah N.K. Makhijani
Director

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