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

Faster and widespread vaccination programs along with accommodative policy responses through both fiscal and monetary stimulus are essential to regain growth momentum following the aftermath of the Delta outbreak. Economic activities have gradually gaining traction after government began carefully lifting the emergency public activity restriction (PPKM). The recent issuance of the law on Harmonization of Tax Regulations (UU HPP) as part of the structural reform will potentially boost tax revenue and expand the tax base as the economic recovery progresses, especially in the long term. External situations are somewhat volatile due to energy crisis that took place in China, India, and Europe, which could threaten the global economic recovery. Despite the recent shock, Rupiah has been steadily appreciating to around 14,200 from around 14,300 on the back of better domestic pandemic situation, elevated commodity prices that boost trade surpluses, and higher foreign reserves. With the downside risks remains on in the rest of 2021 and controlled inflation, we see BI should continue to hold its policy rate at 3.50% in order to maintain Rupiah stability and support national economic recovery.

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