MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, August 2021

Indonesia’s GDP rose by 7.07% (y.o.y) in the second quarter and after exactly one year, we are now officially out of economic recession that started in Q2-2020.  Despite the better-than-expected growth of the economy, the pace of recovery will be limited due to the emergence of Delta variant that has a high transmission rate and causes mobility restrictions to be imposed since last July. Hence, economic indicators, such as Consumer’s Confidence Index (CCI), and Manufacturing Purchasing Managers’ Index (PMI) continued to plunge. From external conditions, the improvement of the U.S. economy resulted in investors moving their capital from emerging markets which caused Rupiah to depreciate against the USD. Therefore, amidst these uncertain circumstances, we see that BI needs to hold its policy rate at 3.50% while maintaining the exchange rate and financial stability.

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