Indonesia's Financial Sector Is Still Maintained Amid Global Economic Uncertainty

JAKARTA - The Financial Services Authority (OJK) assesses that the uncertainty of global conditions is increasing along with the high geopolitical tension and interest rates in the US which are expected to be longer.

Chairman of the OJK Board of Commissioners Mahendra Siregar said the national financial services sector was still maintained in the face of global uncertainty.

It can be seen from maintained capital, liquidity and risk profiles.

"The financial services sector in Inodnesia is stable in dealing with this. This is shown by the maintenance of adequate capital, liquidity and maintained risk profiles," he said at a press conference of the October 2023 Board of Commissioners Meeting, Monday, October 30.

Mahendra said that the economic performance in the United States (US) showed that strengthening was reflected in economic growth in the US in the third quarter of 2023 of 4.9 percent, when compared to the first quarter of 2023 at the level of 2.1 percent.

"This is driving the increase in sell-offs or selling actions in the US bond market, in line with the increasing expectations of interest rates from the higer for longer and also the increase in the supply of US treasury government bonds to finance deficits from the US," he said.

In addition, the increase in debt yields in the United States has caused foreign outflows or flows of funds out of emerging markets including Indonesia and pushed for a significant weakening in the currency exchange rate market and bond market.

Menurut Mahendra, risiko geopolitik global semakin tinggi seiring konflik Israel dan Hamas yang berpotensi mengganggu perekonomian dunia secara signifikan.

In addition, Mahendra estimates that economic growth in Europe is stagnant. Meanwhile, China's economic recovery has not matched expectations and has raised concerns about the global economy.

Meanwhile, the domestic economy showed that the inflation rate was recorded at 2.28 percent (yoy), in line with market expectations of 2.2 percent.

"However, it is necessary to pay close attention to the upward trend in food inflation, especially rice and sugar commodities, amid the potential decline in global production due to El-Nino," he said.

Mahendra said that people's purchasing power is still depressed, as reflected in the decline in core inflation and the consumer confidence index and low retail sales performance.

However, the performance of the corporate sector is relatively well reflected in the manufacturing figures that continue to be in the expansionary zone and trade balance which still record a surplus.

Mahendra said that Indonesia had been officially accepted as a full member of the Financial Action Task Force (FATF) in the FATF plenary meeting on October 25, 2023.

"This achievement shows that the national financial services sector has comprehensively met international standards in implementing anti-money laundering programs, preventing terrorism financing, and preventing the proliferation of weapons of mass destruction," he concluded.