BI Rate Maintained at 5.75% - Bank Sentral Republik Indonesia
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April 18, 2019
No. 15/3A/PSHM/Humas

In the Board of Governors' Meeting convened on February 12th, 2013, Bank Indonesia decided to hold the BI-Rate at 5.75%. The current policy rate is considered consistent with the contained inflationary pressure in accordance with its target range of 4.5%±1% in 2013 and 2014. Bank Indonesia assessed that Indonesia's economy is still showing a strong performance, but remains wary of the high pressure on the external balance as imports remained strong amid a global economic downturn. In the future, Bank Indonesia will strengthen the policy mix to promote the external balance adjustment so that the current account deficit would be at a sustainable level. Bank Indonesia will continue to maintain the stability of Rupiah exchange rate consistent with its economic fundamentals and encourage the realization of a more efficient foreign exchange market. In addition to that, Bank Indonesia will strengthen its policy coordination with the Government in managing domestic demand, in order to maintain macroeconomic stability and a sustainable economic growth.

Indonesia's economy grows quite strong supported by domestic demand, albeit slightly slower than the previous period. Economic growth in the Q4-2012 reached 6.11%, reaching 6.23% for the whole year of 2012. Consumption and investment in the Q4-2012 remained buoyant, although slightly moderated compared to the previous quarter. On the other hand, exports began to improve in line with the economic recovery in some major trading partners such as China. However, the import growth is still high due to the buoyant domestic demand. In the Q1-2013, economic growth is forecasted at 6.2%, mainly supported by domestic demand. For the whole year of 2013, Indonesia’s economic growth is forecasted to reach 6.3% -6.8%.

On the external side, the balance of payment (BOP) in Q4-2012 has improved as shown by increasing surplus despite the fact that the current account deficit was higher than expected. The improvement of BoP was mainly due to the performance of capital and financial transactions supported by the global financial market liquidity. Meanwhile, the rising current account deficits occured mainly due to the decreasing non-oil trade balance surplus and the increasing oil trade balance deficit. In the future, the current account in Q1-2013 is expected to improve, mainly driven by an amelioration in the export performance in line with the economic recovery in some major trading partners such as China and USA At the end of January 2013, International reserves reached USD108.78 billion, or equivalent to 5.9 months of imports and government’s external debt services, above the adequacy level of international standards.

On January 2013, Rupiah depreciated by 0.22% (mtm) to Rp9.654 per USD, with a contained volatility. In the future, Bank Indonesia will continue to maintain the stability of Rupiah exchange rate consistent with its economic fundamentals. Furthermore, Bank Indonesia will support the formation of a reference to Rupiah exchange rate in the domestic spot market. This reference is expected to promote foreign exchange market efficiency, deepening the domestic financial market.

CPI inflation went up in January 2013, but is expected to remain contained in the target range. CPI inflation in January 2013 reached 1.03% (mtm) or 4.57% (yoy) due to a high rainfall that induced disruption of distribution and production. The interrupted supply caused a quite high increase in the volatile food inflation, compared to the previous period. Meanwhile, core inflation remained stable (4.32%, yoy) supported by well-contained inflation expectations, managed demand in line with the production capacity, as well as maintained exchange rate. Looking ahead, there are a number of risk factors that needs to be observed that may increase inflationary pressures, such as weather factors that can interfere with the production and distribution of food as well as increases in some administered prices.

The financial system stability and banking intermediation function are properly maintained. A solid banking industry performance is reflected in the high capital adequacy ratio (CAR), which is well above the minimum 8% and the maintained ratio of non-performing loans (NPL) gross below 5%. Meanwhile, credit growth to the end of December 2012 reached 23.1% (yoy), increased from 22.3% (yoy) in the previous month. Working capital credit grew quite high at 23.2% (yoy) and investment credit recorded stable growth at a high level of 27.4% (yoy), and is expected to boost Indonesia’s economic capacity. Meanwhile, consumer credit grew by 20.0% (yoy). Going forward, Bank Indonesia believes that the financial stability will be maintained with improvement in the banking intermediary function in line with the increase in Indonesia’s economic performance

A complete report of the February 2013 Board of Governors’ Meeting, containing the macroeconomic developments and monetary policy, will be published in the Monetary Policy Report (MPR). This publication is accessible through Bank Indonesia’s website.

Jakarta, 12 February 2013
Office of the Governor

Difi A. Johansyah
Director

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