MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, October 2020

  • Uncertainty is escalating, both domestically and globally. While the people seem somewhat unconvinced that the GoI has already and is doing their best effort to solve the health issues, other issues such as protests against the newly passed Omnibus Law on Job Creation and poor implementation of reimposition of large-scale social restrictions (PSBB) in the Jakarta area certainly add fuel to the flames. As a consequence, Rupiah has been in rapid volatility since midSeptember.In addition, with no clear recovery path to be seen over the horizon, aggregate demand will likely to stay muted as people with excess saving will tend to hold their spending and business to maintain their production level at its minimum level. Thus, any monetary easing for now might be futile to spur economic activity and might risk increasing the pressure on Rupiah depreciation and capital outflow. Thus, we view that BI should hold its policy rate at 4.00% this month, while also maintaining its macroprudential policy to manage financial sector stability.…
    12 Oct
    12 Oct
  • Inflasi (MoM) pada bulan September 2020 kembali mencatatkan deflasi sebesar 0,05%, menandai ketiga kalinya deflasi terjadi secara berturut-turut dalam tiga bulan terakhir.  Adapun kontributor deflasi (MtM) terbesar adalah kelompok barang bergejolak, dimana sepanjang bulan September, beberapa komoditas pangan mengalami deflasi: beras (-0,4% MtM), daging ayam (-1,2% MtM), bawang merah (-4,3% MtM), dan cabai rawit (-7,3% MtM). Meskipun demikian, tren inflasi kelompok bergejolak menunjukkan adanya peningkatan relatif terhadap bulan sebelumnya (baik YoY maupun MtM), mengindikasikan turunnya pasokan pangan selama bulan September 2020 – sebagaimana terjadi pada komoditas cabai merah.…
    02 Oct
    02 Oct
  • Since March, BI has become more concerned over economic growth risks and shifted its policy stance to one that preemptively supports growth to mitigate the impact of the health crisis  while managing the financial market stability. However, the increased risk of the deeper contraction in the global economy, coupled with the prospect of the prolonged spread of the virus in Indonesia, has caused uncertainty in the market at least since early September. As a consequence, Rupiah has weakened to the level of IDR14,900 as of September 14, 2020. It is recorded as the worst-performing currency in emerging Asia. Meanwhile, the accumulation of capital inflows further plunged, thus, picked up the government bonds yields. Despite the very low inflation last month, the credit demand is expected to be halted in the near future following the extension of large-scale social restrictions (PSBB) in the Jakarta area. These conditions provide room for BI to prioritize Rupiah stabilization this month due to the heightened risk of uncertainty in the financial market. Therefore, we view that BI should keep its interest rate at 4.00% this month to maintain financial stability while supporting growth through the macroprudential and unconventional measurements as the channels in prompting liquidity.…
    16 Sep
    16 Sep
  • Melanjutkan tren yang terjadi sejak bulan Maret 2020, inflasi umum pada bulan Agustus 2020 kembali mengalami penurunan sebesar 0,22 bps hingga menjadi 1,32% (YoY) – titik terendahnya dalam 20 tahun terakhir. Kami melihat bahwa tren turunnya inflasi memiliki kaitan yang erat dengan belum pulihnya daya beli masyarakat, sebagaimana tercermin pada tren inflasi inti yang terus menurun sejak Maret 2020. Selain itu, ketidakpastian yang kembali muncul dengan jumlah kasus COVID-19 yang terus meningkat mendorong masyarakat untuk mengurangi konsumsi terlebih investasi dan memilih untuk meningkatkan tabungan.…
    02 Sep
    02 Sep
  • Unsurprisingly, Covid-19 heavily impacted on Indonesia economic growth as the outbreak creates widespread disruptions in all aspects of the economy. The GDP growth sharply contracted by -5.32% (yoy) in the second quarter of 2020, marked as the worst plunge since the 1998 Asian Financial Crisis. Several key economic-driven sectors such as manufacture, wholesale and retail trade, construction, transportation, and accommodation have been hit the hardest as a consequence of the social restriction policies to curb the virus spread. The economic downturn was also fully reflected in the expenditure side, where negative growth was seen across all GDP components. Household consumption and investment dropped by -5.51% and -8.61% (yoy), respectively. Although the probability of slower economic activity in Q3-2020 is inevitable since the business cannot operate at full capacity and lower sales are preventing full economic recovery, the government needs to stay vigilant and focus on avoiding further economic deterioration. Meanwhile, low inflation persists, and there is even a possibility of deflation in the upcoming months as precautionary saving among middle upper-class income group is likely to play a lasting role, leading to a low level of aggregate consumption.…
    18 Aug
    18 Aug
  • Inflasi pada bulan Juli 2020 mengalami penurunan yang cukup signifikan dibandingkan bulan sebelumnya, yaitu sebesar 0,4 bps, hingga menjadi 1,54% (YoY). Bahkan, inflasi MtM pada bulan Juli 2020 tercatat mengalami deflasi sebesar 0,1% – tingkat terendah dalam 10 bulan terakhir. Adapun penurunan inflasi tersebut disumbangkan oleh turunnya komponen inflasi bergejolak (sebesar 2,11 bps) dan inflasi inti (sebesar 0,19 bps). Turunnya laju pertumbuhan output yang juga disertai dengan terus menurunnya laju inflasi mengindikasikan dominasi komponen permintaan agregat, ketimbang komponen penawaran agregat dalam shock ekonomi yang dipicu oleh COVID-19. Melemahnya permintaan agregat tercermin pada menurunnya laju inflasi inti secara konsisten sejak bulan Maret, sebagai bentuk adaptasi masyarakat terhadap krisis ekonomi COVID-19 baik dalam bentuk pengurangan konsumsi dan peningkatan tabungan (saving).…
    04 Aug
    04 Aug
  • It has been five months since the first announcement of Covid-19’s confirmed case in Indonesia on the early March. The massive widespread of the virus has brought a catastrophic impact, not only on human health but also on economic consequences. The set of measurements, such as global travel restrictions and social distancing, affect nearly all economic sectors. Unsurprisingly, the disruption was reflected by the lower-than-expected economic growth in Q1-2020 at 2.97% compared to the traditional consensus of 3.5-4%. The main contributors to the GDP, such as manufacturing, wholesale and retail trade, construction, and mining and quarrying sectors, which accumulatively accounted for more than half of the GDP, experienced a contraction in Q1-2020.  At the same time, household consumption slumped to 2.84%, far below 5.01% growth recorded in the same period last year. The disruption in domestic demand is reflected by the drop in almost all subsectors in consumption.…
    04 Aug
    04 Aug
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