MACROECONOMIC ANALYSIS SERIES: BI Board of Governor Meeting, February 2019

The national economy grew slightly higher than market expectations amidst global uncertainty throughout 2018 with the highest recorded growth since 2014 at 5.17% (yoy). Robust fundamental conditions were also reflected in low and stable inflation. The trend of Rupiah appreciation, with Rupiah recorded below Rp14,000 level in early February, has been driven by the strong influx of portfolio capital since October 2018. Last year’s threatening external pressures have slowly subsided along with the weakening global economy that is almost certain to occur in the next two years; this will continue contribute to further lowering global commodity prices. This trend has caused challenges to the national trade balance which is mainly driven by commodities exports such as coal and palm oil. Crude oil price on the other hand will continue to be a source of uncertainty for Rupiah in 2019; the price has hit three-month high as global supply gets cut. Overall, we view that BI should maintain its current policy interest rates this month.

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