Efforts to find new sources of economic growth must continue to raise optimism in addition to boosting Indonesia’s economic resilience amid global pressure and uncertainties.
By
DIMAS WARADITYA NUGRAHA
·4 minutes read
ANTARA FOTO/ADITYA PRADANA PUTRA
President Joko Widodo speaks at the 2019 Bank Indonesia Annual Meeting (PTBI) on Thursday evening (28/11/2019) in Jakarta. The event was themed “Synergy of innovation transformation towards an advanced Indonesia”.
JAKARTA, KOMPAS – Efforts to find new sources of economic growth must continue to raise optimism in addition to boosting Indonesia’s economic resilience amid global pressure and uncertainties.
This was the gist of President Joko “Jokowi” Widodo’s opening speech on Thursday (28/11/2019) evening at the 2019 Bank Indonesia Annual Meeting (PTBI) in Jakarta, themed “Synergy of innovation transformation towards an advanced Indonesia”, which was opened by Bank Indonesia (BI) Governor Perry Warjiyo.
The President analogized Indonesia’s current situation to the event suffered by Chuck Noland, the character Tom Hanks played in the 2001 film, Cast Away. Based on a true story, Noland becomes stranded on an uninhabited island and must rely on his resourcefulness to survive and get home.
We will then attract foreign investment under the improved investment climate.
Jokowi said that the film illustrated the current situation in Indonesia. Amid the threat of a global recession, the country must find sources of foreign exchange that had not been fully optimized.
“Regarding boosting foreign exchange [revenue], the infrastructure [projects] for five out of the 10 ‘new Balis’ will be completed in 2020. We will then attract foreign investment under the improved investment climate,” said the President.
BI governor Perry said on opening the meeting that the central bank would focus on maintaining stability and boosting economic growth in 2020 towards accommodative monetary and macroprudential policies.
“Policies on payment systems will focus on strengthening digital tools and public infrastructure through the development of open banking and strengthening the configuration of the retail payment system,” he said.
ANTARA FOTO/ADITYA PRADANA PUTRA
President Joko Widodo (center left, facing camera) and Bank Indonesia (BI) Governor Perry Warjiyo (center right) chat on Thursday evening (11/28/2019) at the 2019 Bank Indonesia Annual Meeting in Jakarta.
Perry said he believed Indonesia’s economic prospects would continue in 2020 through sustained growth. Indonesia’s economy is expected to grow between 5.1 percent and 5.5 percent next year, with inflation of 2-4 percent. The current account deficit was expected to be 2.5-3 percent of gross domestic product (GDP) in 2020.
BI also expected 8-10 percent growth in third-party funds next year. Meanwhile, bank credit growth was expected to reach 10-12 percent in line with falling interest rates and improving economic prospects.
“Indonesia’s economic prospects will be better in the mid-term. Economic transformation will support higher growth with a lower current account deficit and inflation,” said Perry.
Nevertheless, the global economy was not expected to recover next year, partly because of the ongoing continuing trade war between the US and China. Meanwhile, the monetary policies of the US Federal Reserve, the European Central Bank and the Bank of Japan may not be effective in overcoming the adverse effects of the trade war to save the global economy.
Indonesia’s economic prospects will be better in the mid-term.
“Central banks cannot be ‘the only game in town’ [sic] tackling the trade war’s adverse effects. A synergy of the national economic policy mix is needed through fiscal stimulus and economic reforms in the real sector in order to boost economic growth,” he said.
Volatility was expected to continue in the flow of foreign capital and exchange rates in the world’s financial markets in 2020.
Correct target
Private bank PT Bank Central Asia president director Jahja Setiaatmadja expressed hoped that BI’s macroprudential policies would hit the right targets. He said that loosening the loan-to-value (LTV) policy was good for the banking industry, but that it could not be implemented in all banks that offered housing loans.
“The lighter the LTV, the higher the risk. If we buy a house using a low down payment [mortgage], surely the risk will be greater for bigger banks,” he said.
PT Bank Mandiri (Persero) vice president director Sulaiman A. Ariyanto said that the state-owned bank supported implementing BI’s monetary policy to maintain the stability of the finance sector and to boost economic growth.
Bank Mandiri would actively help BI develop products to deepen the domestic financial market.
