JAKARTA - The Rapat Dewan Gubernur (RDG) Bank Indonesia, held from October 18-19, 2023, has decided to raise the BI 7-Day Reverse Repo Rate (BI7DRR) by 25 bps to 6.00%. Concurrently, the interest rate for the Deposit Facility was raised to 5.25%, and the Lending Facility rate was adjusted to 6.75%, both marking an increment of 25 bps.
This hike aims to strengthen the policy for stabilizing the Rupiah against escalating global uncertainties. The proactive and forward-looking measure is designed to mitigate the impact on inflation from imported goods. The objective remains to keep inflation under control, aiming for 3.0±1% in 2023 and 2.5±1% in 2024.
In tandem with these measures, a more relaxed macroprudential policy will be fortified with the effective implementation of the Kebijakan Insentif Likuiditas Makroprudensial (KLM) and a reduction in the Penyangga Likuiditas Makroprudensial (PLM) ratio. These steps intend to propel credit financing for national economic growth. Moreover, the acceleration in the digitalization of payment systems is prioritized to enhance economic and digital financial inclusion, including the digitalization of financial transactions for Central and Regional Governments.
Bank Indonesia remains committed to maintaining stability and fostering sustainable economic growth through a combination of monetary, macroprudential, and payment system policies. Among the strategies are:
- Intervening in foreign exchange markets.
- Enhancing monetary operation strategies.
- Introducing pro-market monetary instruments.
- Issuing Rupiah and foreign currency securities.
- Reinforcing lax macroprudential policies to sustain economic growth.
- Providing liquidity relaxation through reduced PLM ratios.
- Deepening transparency in base lending rates.
- Speeding up digital payment system digitalization to expand the Digital Financial Economy (EKD) ecosystem.
To protect macroeconomic stability and growth against the ripple effects of high global uncertainties, the coordination between Bank Indonesia's policies and the government's fiscal policies will be strengthened.
Globally, the economy is slowing with surging uncertainties. The projected global economic growth for 2023 stands at 2.9%, slowing to 2.8% in 2024. Factors such as the US economy's robust growth, China's slowing consumption, geopolitical tensions, and the consequent global inflation spike play significant roles in this deceleration. Consequently, central banks, including the Federal Reserve, are predicted to maintain high policy rates for longer periods.
In contrast, Indonesia's economy is forecasted to remain resilient and exhibit healthy growth, even amidst global ripple effects. For Q3 2023, growth is driven by private consumption and continued completion of National Strategic Projects (PSN). The nation's GDP is anticipated to grow between 4.5-5.3% in 2023 and expected to rise in 2024, bolstered by various domestic factors.
The performance of Indonesia's Balance of Payments (NPI) continues to support external stability, with a trade surplus of $7.8 billion USD in Q3 2023. However, increasing global uncertainties call for enhanced policy responses to mitigate potential negative spillovers to domestic economic resilience, particularly in emerging markets like Indonesia.
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