Indonesia’s economic growth contracted by -2.07% in 2020, plunged into its first recession in two decades since the 1998 Asian financial crisis. Despite continuing a recession since Q3, economic growth was relatively better than -3.5% (y.o.y) of the global growth and was slowly recovered in Q4-2020 which was recorded at 2.19% (y.o.y). Although the impact of Covid-19 crisis is still lingering, Indonesia’s economic growth is expected to gradually rebound this year on the back of massive policy support to boost households and businesses’ confidence and provide adequate social assistance as well as vaccine roll out to dampen the infection rate. Inflation remains well below target and is not expected to accelerate sharply in the near term as demand remains muted on the effects of the Covid-19 pandemic that  ravaged the economy and battered people’s purchasing power. Surprisingly, on the other hand, the external conditions show a glimmer of hope with the continuing surge of portfolio inflows, favorable monthly trade surplus, and high foreign exchange reserves that helped to strengthen Rupiah stability. All in all, considering the current domestic and external situations, we see that now is the perfect momentum for BI to implement another policy rate cut by 25bps to 3.50% this month to support the economic recovery agenda while maintaining the financial sector stability.

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