DEPOK (eNBe Indonesia) - The central bank, Bank Indonesia (BI), decided to hold the BI 7-Day Reverse Repo Rate at 3.50% while maintaining the deposit facility rates at 2.75% and lending facility rates at 4.25%.
The decision is consistent with the need to maintain exchange rates and financial system stability amid projected low inflation and efforts to revive economic growth.
BI said domestic economic gains endured. In the third quarter (Q3) of 2021, economic performance is expected to continue improving on the back of solid exports and increasing consumption and investment activities in line with greater public mobility.
By sector, the manufacturing industry, mining, trade, and information and communications continue to perform well. The main contributors to the domestic economic recovery include the regions of Sulampua (Sulawesi, Maluku, Papua), Java, Sumatera, and Kalimantan, driven by exports.
Several early indicators in October 2021 pointed to ongoing economic improvements, namely retail sales, consumer expectations, Manufacturing PMI, payment transactions via the national clearing system, and Bank Indonesia-Real Time Gross Settlement (BI-RTGS) system as well as exports.
BI is anticipating stronger national economic growth through to the fourth quarter (Q4), with overall growth for 2021 projected at 3.5-4.3%.
In addition, economic growth is expected to accelerate in 2022 in response to greater public mobility given the faster vaccination rollout, persistently strong export performance, broader reopening of priority sectors, and ongoing policy stimuli.
Meanwhile, Finance Minister Sri Mulyani Indrawati noted that economic recovery would continue entering the third quarter (Q3) of 2021. Meanwhile, efforts to suppress the increase in COVID-19 cases require high additional costs.
Fortunately, the Government’s flexible, anticipatory, and responsive measures have shown tangible results with the growth of economic activity and public consumption.
The positive trend in state revenue is expected to continue as the economy improves. State expenditures continue to be encouraged in the form of stimulus. Still, they are maintained for fiscal consolidation so that the impact is a decrease in the budget deficit, which affects the decrease in financing needs.
The Government also reported that the national economic recovery program (PEN) realization had reached Rp428.2 trillion per Oct. 18, 2021, or 57.5% of this year’s target of Rp744.77 trillion.
In addition, BI said the global economic recovery was slower than previously projected. Economic growth projections for the United States, China, and Japan had been downgraded due to the impact of the highly contagious Delta variant of COVID-19, coupled with supply chain disruptions and global energy limitations.
In contrast, a faster economic recovery in Europe remains intact, thus offsetting global moderation.
In September 2021, several early indicators trended downwards, including the Purchasing Managers Index (PMI), retail sales, and consumer confidence. Therefore, BI revised its global economic growth projection for 2021 to 5.7% from 5.8%.
World trade volume and international commodity prices continue to rise, thus supporting the export outlook in developing economies. The global economic recovery is predicted to endure in 2022, but the impact of supply chain disruptions and energy limitations demands vigilance.***