The Bank Indonesia Board of Governors agreed on 14-15th January 2025 to lower the BI-Rate by 25bps to 5.75%, while also lowering the Deposit Facility (DF) rate and Lending Facility (LF) rate by 25bps to 5.00% and 6.50%, respectively. The decision is consistent with low projected inflation in 2025 and 2026 within the 2.5±1% target corridor, maintaining the rupiah exchange rate in line with economic fundamentals to control inflation within the target range and the need to also drive economic growth. Moving forward, Bank Indonesia will continue directing monetary policy towards maintaining inflation within the target corridor and exchange rate in line with the Rupiah's fundamental value, while considering further room for monetary easing to strengthen economic growth in line with global and national economic dynamics. Meanwhile, Bank Indonesia is maintaining pro-growth macroprudential and payment system policies to foster sustainable economic growth. Bank Indonesia will hold an accommodative macroprudential policy stance to revive bank lending/financing to priority sectors and create job opportunities, including the MSME sector and green economy, by strengthening the Macroprudential Liquidity Incentive (KLM) policy strategy, commencing in January 2025, while maintaining prudential principles. Payment system policy is also directed towards bolstering growth, particularly in the trade and MSME sector, strengthening reliable infrastructure and reinforcing the structure of the payment system industry, while expanding acceptance of payment system digitalisation.
Bank Indonesia has, therefore, strengthened its monetary, macroprudential and payment system policy mix to maintain stability and support sustainable economic growth through the following measures:
- Strengthening the pro-market monetary operations strategy to enhance monetary policy effectiveness, accelerate money market and foreign exchange market deepening and attract foreign capital inflows by:
- optimising Bank Indonesia Rupiah Securities (SRBI), Bank Indonesia Foreign Exchange Securities (SVBI) and Bank Indonesia Foreign Exchange Sukuk (SUVBI) as pro-market instruments,
- strengthening the interest rate structure of monetary instruments to attract portfolio inflows to domestic financial assets,
- strengthening strategies to maintain competitive term-repo and forex swap transactions, and
- strengthening the function of Primary Dealers (PD) to increase SRBI transactions in the secondary market and repurchase agreement (repo) transactions between market players.
- Stabilising the Rupiah through foreign exchange market intervention with a focus on spot and Domestic Non-Deliverable Forward (DNDF) transactions, as well as government securities (SBN) in the secondary market.
- Strengthening prime lending rate (PLR) transparency policy with a focus on interest rates by KLM policy priority sectors.
- Strengthening acceptance of digital payments by optimising the Phase I, Stage II features of BI-FAST, namely bulk transfers, requests for payment and direct debit, and
- Strengthening the implementation of electronification initiatives to support government programs through the digitalisation of social security programs and electronification of the transportation sector.
Bank Indonesia continues strengthening policy coordination with the Government to maintain stability and revive economic growth in line with programs under the auspices of Asta Cita as follows:
- First, monetary and fiscal policy coordination strengthened by Bank Indonesia purchasing government securities (SBN) in the secondary market through bilateral buyback/debt switching mechanisms.
- Second, Bank Indonesia support to strengthen food security through coordination with the (central and regional) Government in terms of food self-sufficiency, which includes the National Movement for Food Inflation Control (GNPIP) in various regions within the Central and Regional Government Inflation Control Teams (TPIP and TPID).
- Third, Bank Indonesia support for economic financing through KLM policy to revive bank lending/financing to priority sectors, including inclusive and green finance.
- Fourth, Bank Indonesia support to accelerate digital transformation of the Government, including through coordination with the Regional Digitalisation Acceleration and Expansion Team (TP2DD) for the digitalisation of social security programs, electronification of regional government financial transactions, and electronification of the transportation sector.
In addition, policy synergy between Bank Indonesia and the Financial System Stability Committee (KSSK) is also strengthened to maintain financial system stability. Bank Indonesia is also strengthening and expanding international cooperation among central banks, including through payment system connectivity and local currency transactions (LCT), as well as promoting investment and trade in priority sectors in synergy with relevant institutions.
Global economic growth divergence is widening and global financial market uncertainty persists. Economic growth in the United States (US) has exceeded projections on the back of fiscal stimuli that boost domestic demand, coupled with higher investment in technology which drives higher productivity. In contrast, the economies of Europe, China and Japan remain sluggish given weaker consumer confidence and limited productivity, while India's economy has been subdued, constrained by manufacturing sector. The global economic growth outlook for 2025, therefore, is expected to exceed the previous projection and reach 3.2%. On the other hand, the direction of government and central bank policy in the United States is impacting global financial market uncertainty. The strong US economy and knock-on effect of inward-looking trade policies are prolonging the disinflation process in the United States and have simultaneously strengthened expectations of more limited reductions on the Federal Funds Rate (FFR). Expansionary fiscal policy in the US is sustaining high US Treasury yields on short- and long-term tenors. In conjunction with deepening geopolitical tensions, such developments have triggered a rebalancing among global investors, with portfolio allocations returning to the US. In addition, a high US dollar index is intensifying pressures on various global currencies. Global economic developments require a strong policy response, therefore, to mitigate the adverse impacts of global spillovers, maintain stability and drive domestic economic growth.
Economic growth in Indonesia's performing well, albeit with a tendency to be lower than previously forecasted. Fourth-quarter economic growth in 2024 was slightly below the projection due to lower domestic demand in the form of consumption and investment. Overall, economic growth in 2024 is projected slightly below the midpoint of the 4.7-5.5% range. In 2025, economic growth is also forecast slightly below the previous projection. Lower exports will stem from softer demand in Indonesia's major trading partners, except the US. Household consumption also remains weak, particularly among lower-middle income earners given restrained expectations of income and job availability. At the same time, private investment remains weak due to larger production capacity than domestic and export demand. Bank Indonesia projects domestic economic growth in 2025 in the 4.7-5.5% range, slightly below the previous projection of 4.8-5.6%. Bank Indonesia, therefore, will continue optimising its policy mix to maintain stability and support sustainable economic growth. Such efforts will be realised by optimising macroprudential policy stimuli and accelerating payment system digitalisation by Bank Indonesia with the fiscal policy stimuli of the Government. Furthermore, Bank Indonesia fully supports the implementation of government programs in Asta Cita, encompassing food security, economic financing, as well as accelerating the digital economy and finance.
Indonesia's Balance of Payments (BOP) remains sound, thereby supporting external resilience. The BOP surplus in December 2024, recorded at USD2.2 billion, was supported by strong export performance for Indonesia's major commodities, namely minerals, fixed vegetable oils and fats, as well as iron and steel, among others. Such developments supported a solid current account balance in 2024, with a narrow deficit projected in the 0.1-0.9% of GDP range. Meanwhile, high global financial market uncertainty impacted foreign capital inflows to domestic financial instruments for investment, with the SBN and SRBI instruments recording net inflows of just USD19 million and USD288 million at the beginning of 2025 (as of 13th January 2025). The position of foreign reserves at the end of December 2024 was recorded higher at USD155.7 billion, equivalent to 6.7 months of imports or 6.5 months of imports and servicing government external debt, which is well above the international adequacy standard of around 3 months of imports. In 2025, BOP performance is projected to remain solid in line with a maintained capital and financial account surplus and manageable current account deficit in the 0.5-1.3% of GDP range. The capital and financial account surplus is supported by foreign capital inflows in line with positive investor perception of the domestic economic outlook and attractive yields on investment.
Rupiah exchange rates remain under control despite elevated global uncertainty, underpinned by Bank Indonesia stabilisation policy. Against the US dollar, the Rupiah in January 2025 (as of 14th January 2025) only lost 1.00% (ptp) in value from the level recorded at the end of 2024. The Rupiah outperformed several other regional currencies against the US dollar in the reporting period, including the Indian rupee, Philippine peso and Thai Baht, which depreciated 1.20%, 1.33% and 1.92%, respectively. In contrast, the Rupiah appreciated against a basket of AE currencies, excluding the US dollar, and remained stable against the currencies of developing economies (DE). This is consistent with Bank Indonesia's stabilisation policy and supported by maintained foreign capital inflows, attractive yields on domestic financial instruments for investment and the promising economic growth outlook for Indonesia. Moving forward, the Rupiah exchange rate is projected to remain stable in line with Bank Indonesia's firm policy commitment to maintain Rupiah stability, attractive yields, low inflation and a promising economic growth outlook for Indonesia. Furthermore, Bank Indonesia continues optimising the full panoply of monetary instruments available, which includes strengthening its pro-market monetary operations strategy through the SRBI, SVBI and SUVBI instruments to boost policy effectiveness in terms of attracting portfolio inflows and supporting efforts to strengthen the Rupiah exchange rate.
Consumer Price Index (CPI) inflation in 2024 was maintained within the 2.5%±1% target corridor in line with CPI inflation in December 2024, which was recorded at 1.57% (yoy). This was influenced by core inflation, which was managed at a rate of 2.26% (yoy) in line with BI-Rate policy consistency by Bank Indonesia to anchor inflation expectations to the target. Meanwhile, volatile food (VF) recorded 0.12% (yoy) inflation in the reporting period, supported by increasing food supply during the ongoing harvesting season and close synergy to manage inflation between the TPIP/TPID teams through the GNPIP movement. Spatially, CPI inflation in various regions was maintained within the national inflation target. Moving forward, Bank Indonesia is confident that CPI inflation will remain under control and within the target corridor. Core inflation is projected to remain manageable in line with anchored inflation expectations, massive economic capacity in response to domestic demand, managed imported inflation in line with Rupiah stabilisation policy by Bank Indonesia, as well as the positive impact of digitalisation. Bank Indonesia also expects volatile food (VF) inflation to remain manageable, underpinned by inflation control synergy between Bank Indonesia and the (central and regional) Government. Furthermore, Bank Indonesia remains fully committed to strengthening monetary policy effectiveness in order to maintain inflation in 2025 and 2026 within the 2.5±1% target range, while continuing to support efforts to strengthen economic growth.
Bank Indonesia continues optimising various pro-market monetary instruments to strengthen Rupiah stability and achieve the inflation target. This policy also aims to accelerate money market and foreign exchange market deepening efforts and attract foreign capital inflows. As of 14th January 2025, the respective positions of SRBI, SVBI and SUVBI instruments stood at Rp914.72 trillion, USD1.96 billion and USD436 million. SRBI issuances have attracted portfolio inflows to Indonesia and strengthened the Rupiah, as reflected by significant non-resident holdings of SRBI totalling Rp228.85 trillion (25.02% of total outstanding). The implementation of Primary Dealers (PD) since May 2024 has also increased SRBI transactions in the secondary market along with repurchase agreement (repo) transactions between market players, thereby strengthening the effectiveness of monetary instruments that support Rupiah stability and inflation control. Moving forward, Bank Indonesia will continue optimising its various innovative pro-market instruments in terms of volume and attractive yields to enhance the effectiveness of monetary policy transmission, accelerate money market and foreign exchange market deepening and attract foreign capital inflows.
Monetary policy transmission, through interest rate channel, remains effective in supporting sustainable economic growth. The IndONIA money market reference rate is still moving within the BI-Rate range, recorded at 6.03% on 14th January 2025. As of 10th January 2025, SRBI rates remain attractive to support foreign capital inflows at 7.06%, 7.10% and 7.23% for tenors of 6, 9 and 12 months, respectively. Meanwhile, SBN yields on tenors of 2 and 10 years increased to 6.98% and 7.25% (as of 14th January 2025), thus maintaining attractive yields on domestic financial instruments despite increasing global uncertainty. Interest rates in the banking industry remain conducive, supported by ample liquidity and pricing efficiency in the banking industry, which is improving in line with PLR transparency policy. The 1-month term deposit rate and lending rate were also relatively stable in December 2024 at 4.87% and 9.20%, respectively.
The role of bank lending/financing in 2024 was significant in supporting economic growth. Credit growth in 2024 reached 10.39% (yoy), which is within the 10-12% range projected by Bank Indonesia. On the supply side, solid credit growth was supported by bank lending appetite, the current bank strategy to reallocate liquid assets to credit growth, massive funding support from deposit growth as well as the positive impact of Bank Indonesia's KLM policy. On the demand side, loan growth is supported by robust corporate performance, as household consumption remains limited. By loan type, credit growth is primarily supported by working capital loans, investment loans and consumer loans, growing 8.35% (yoy), 13.62% (yoy) and 10.61% (yoy), respectively. Furthermore, sharia financing recorded 9.87% (yoy) growth, while MSME loan growth stood at 3.37 % (yoy) in the reporting period. Consequently, Bank Indonesia projects higher credit growth in 2025 in the 11-13% range in line with the promising economic growth outlook and macroprudential policy support from Bank Indonesia. In addition, various policy incentives from the Government are also expected to further revive the demand for credit.
Bank Indonesia continues strengthening the effectiveness of KLM implementation. In 2025, KLM is directed to support growth and job creation. Commencing on 1st January 2025, KLM incentives are disbursed to sectors that support growth and job creation, including agriculture, trade and manufacturing, transportation, storage and tourism and the creative economy, construction, real estate, and public housing, as well as MSMEs, ultra microfinance and green finance. As of the second week of January 2025, Bank Indonesia has disbursed KLM incentives totalling Rp295 trillion, up Rp36 trillion from Rp259 trillion at the end of October 2024. Thus far, KLM incentives have been distributed to state-owned banks totalling Rp129.1 trillion, national private commercial banks totalling Rp130.6 trillion, regional government banks totalling Rp29.9 trillion, and foreign bank branches totalling Rp5 trillion. Moving forward, Bank Indonesia will continue reviving bank lending/financing and strengthening synergy with the Government, financial authorities, government ministries/agencies, the banking industry and businesses.
Financial system resilience remains solid. Banking liquidity remains adequate, as reflected in the Liquid Assets to Deposits ratio of 25.59% in December 2024. The Capital Adequacy Ratio (CAR) also remained high in November 2024 at 26.89%, thereby absorbing risk and supporting credit growth effectively. Meanwhile, non-performing loans (NPL), as a proxy of credit risk, were also low in November 2024, as indicated by NPL ratios of 2.19% (gross) and 0.75% (nett). The latest BI stress tests indicate solid banking industry resilience against various risks, supported by maintained corporate repayment capacity and profitability. Moving forward, Bank Indonesia will continue strengthening synergy with the KSSK Committee to mitigate various risks that could potentially disrupt financial system stability.
Digital economic and financial transactions remained solid in 2024, supported by secure, seamless and reliable payment systems. Digital payments[[1]] grew 36.1% (yoy) to reach 34.5 billion transactions, supported by all components. Transaction volume through mobile banking applications grew 39.1% (yoy), with the volume of transactions via internet banking similarly growing by 4.4% (yoy) in 2024. In addition, digital payment transaction volume through QRIS enjoyed impressive 175.2% (yoy) growth, supported by increasing numbers of users and merchants. Digital payments are projected to increase 52.3% (yoy) in 2025. From an infrastructure perspective, the volume of retail transactions processed through BI-FAST grew 62.4% (yoy) to reach 3.4 billion transactions, with a value of Rp8.9 trillion in 2024. On the wholesale or high-value side, the BI-RTGS system processed 10.3 million transactions, up 3.1% (yoy) on the previous year, with transaction value increasing 17.6% (yoy) to Rp126.3 thousand trillion. In 2025, the volume of BI-FAST transactions is projected to grow by 34.1% (yoy), accompanied by 11.4% (yoy) growth expected in the value of BI-RTGS transactions. In terms of Rupiah currency management, total currency in circulation grew 9.3% (yoy) to Rp1,204.5 trillion at the end of December 2024, with 5.7% (yoy) growth project in 2025.
Payment system stability has been maintained, supported by a sound industry structure and stable infrastructure. In terms of the infrastructure, payment system stability is reflected in the seamless and reliable payment system (SPBI) maintained by Bank Indonesia, along with an adequate money supply of currency fit for circulation in December 2024. Regarding the structure of the payments industry, payment system interconnection and the digital economy and finance ecosystem continue to expand. Payment transactions based on the National Open API Payment Standard (SNAP) continue to grow as SNAP adoption among various industry players expands. Bank Indonesia will continue ensuring adequate availability of Rupiah currency fit for circulation in suitable denominations throughout all regions of the Republic of Indonesia, particularly in frontier, outermost and underdeveloped (3T) regions.
1 Digital payments include transactions through mobile applications and the internet.
