It is hoped that the increase in the BI Rate will not disrupt regional economic growth

This increase in interest rates was forced to be carried out in the hope of exchange rate stability. Public consumption is a concern.

KOMPAS/PRIYOMBODO (PRI)

Employees check the US dollar stock at the foreign exchange counter of PT V8 Valasindo in Jakarta on Sunday (21/4/2024). The exchange rate of the rupiah against the US dollar on Friday (19/4/2024), according to the Jakarta Interbank Spot Dollar Rate (Jisdor), weakened by 0.63 percent to Rp 16,280.

BANDUNG, KOMPAS — The increase in Bank Indonesia's benchmark interest rate is not expected to disrupt the growth of regional economics. However, regions are still asked to guarantee affordability and availability of supplies as well as effective distribution to ensure this.

Previously, Bank Indonesia raised its benchmark interest rate or BI rate to 6.25 percent as of Wednesday (24/4/2024). An increase of 25 basis points or bps had to be carried out to maintain exchange rate stability.

Deputy Governor of Bank Indonesia, Doni Primanto Joewono, stated in Bandung on Friday (26/4/2024) that they were forced to raise interest rates as a result of global turbulence. Stagflation, or stagnant economic growth in the United States as a world economic power, combined with the heated geopolitics in the Middle East, has led to an impact on the exchange rate of the US dollar.

Also read: BI Rate Increases to 6.25 Percent, Real Sector Needs Anticipation

The BI.go.id page states that the transaction rate for the United States Dollar (USD) against the Rupiah (IDR) reached Rp 16,289 this Friday. This figure sharply increased from 10 days prior, on Monday (16/4), which touched Rp 15,952 per US dollar.

This condition causes outflows or withdrawals of money to occur in emerging (developing) countries, including Indonesia. This condition, continued Doni, forced BI to raise interest rates in the hope of exchange rate stability.

BANK INDONESIA

The results of Bank Indonesia's Consumer Survey in March 2024 showed an increase in consumer confidence by 123.8 basis points. Source: Bank Indonesia.

“The global and domestic conditions of the United States are currently uncertain. The strengthening of the US dollar has created an outflow for emerging countries, including Indonesia. "We were forced to increase the BI rate from 0.25 percent to 6.35 percent so that there could be an inflow (money coming in)," he said.

According to Doni, this condition needs to be carefully examined, especially in terms of the community's consumption aspect. He hopes that investments in the development sector, whether in strategic projects or properties, can support economic growth in the midst of this uncertain condition.

"We believe that economic growth is still quite good, including in West Java. Looking at the current conditions, we estimate that economic growth in the first and second quarters will be much better than in the fourth quarter of 2023," he explained.

To ensure that this condition is achieved, Doni hopes that the newly appointed Head of BI West Java Representative, Muhamad Nur, will maintain price stability through synergy with the government. Not only ensuring affordability and availability of supply, but effective distribution and communication also need to be encouraged for economic growth in West Java.

In the same opportunity, Acting Governor of West Java Bey Machmudin also hopes for continued good cooperation with BI, through the new leadership. He appreciates the performance of the previous leader, Erwin Hutapea, who is now promoted to Head of BI Representative in East Java.

According to Bey, Bank Indonesia's analysis of West Java's economic potential serves as a guide for the government in making policies in various sectors. These aspects, especially in the realm of creative industries, tourism, agriculture, and information technology, are the focus of attention.

KOMPAS/RIZA FATHONI

Visitors inspect a row of used motorcycles offered for cash or credit purchase at one of the booths in the Jakarta Fair event on Saturday (20/6/2009).

"The collaboration and synergy that have been established with BI Jabar are important for us to enhance. They are all part of the support for the development and realization of the welfare of the Jabar community," he explained.

West Java's economy, continued Bey, needs to be well maintained because previously it was growing positively. He explained that the West Java economy in the fourth quarter of 2023 grew 5.15 percent year on year or growth from year to year. This figure exceeds the previous quarter which reached 4.58 year on year.

Support and cooperation with BI, Bey continued, also exist in maintaining inflation in West Java. He stated that inflation in this province reached 0.51 percent, which is higher compared to the previous month which was 0.45 percent.

"The role of West Java Central Bank in maintaining macroeconomics is crucial, especially regarding policy issues and economic growth that face extraordinary challenges. The preservation of economic stability and resilience in West Java will ultimately increase investment inflows and sustainable development for the prosperity of the West Java community," Bey stated.

Also read: Response to BI Rate Increase, Stimulus Needed