Foreign Capital Flow Continues To Come Out, External Pressure Is Predicted To Be Still High In 2024

JAKARTA - Bank Mandiri Chief Economist Andry Asmoro said external pressure is still high and financial market stabilization policies continue to be carried out considering the increasing external pressure.

"VOLatility in the money market is mainly influenced by the Fed's policy of maintaining its benchmark interest rate at a current high level, which is in the range of 5.25 percent - 5.50 percent, in line with the pace of US inflation which is still difficult to reduce," he said in his statement, Friday, June 7.

In addition, Andry said that the delay in lowering the benchmark interest rate was still encouraging capital escape. From the beginning of the year to June 6, 2024, capital flows came out in the domestic market from the stock market and bonds were recorded at IDR 43.5 trillion.

Andry is expected to decline the first Fed Funds Rate (FFR) to 5.00 percent - 5.25 percent, which will occur towards the end of 2024 or if US inflation drops to a target of 2 percent.

Andry said foreign exchange reserves would remain adequate in the future. Although the downward trend in foreign exchange reserves in recent months is in line with the increasing turmoil in global financial markets, which is driving capital flows out of Indonesia and increasing pressure on the Rupiah exchange rate against foreign currencies.

"Although external pressure will continue because of the Fed's policy which is still Higher for Longer, BI stated that foreign exchange reserves will remain adequate with the support of national economic stability," he explained in his statement, Friday, June 7.

Andry explained that the policy mix pursued by the Government and the Central Bank will be able to encourage economic growth. The domestic economy will be supported by consumption and strong investment.

In addition, Bank Indonesia also continues to pursue a triple intervention policy and optimizes pro-market instruments to maintain financial market stability.

"This policy is expected to attract foreign funds back into the domestic market," he said.

Andry estimates that the rupiah exchange rate will reach the range of Rp. 15,813 per US dollar at the end of 2024, and the domestic economy is estimated to grow solidly by 5.06 percent in 2024.