Bank Indonesia: Pandemic Causes Economic 'bruising', Policy Communication Is A Recipe For Recovery

Bank Indonesia Governor Perry Warjiyo (Photo: Screenshot of G20 virtual channel)

JAKARTA - Bank Indonesia (BI) assesses that the COVID-19 pandemic has left a deep scarring effect on the world economy, including Indonesia.

BI Governor Perry Warjiyo said that in order to recover from these wounds, policies were calibrated, planned and communicated well (well calibrated, well planned, well communicated) by each country.

"This is especially useful in boosting productivity and investment, along with strategies in the field of employment and capital reallocation," he said at the 1st Finance Ministers and Central Bank Governors (FMCBG) G20 in Jakarta, Thursday, February 17.

According to Perry, each country needs to prepare a strategy to anticipate normalization policies and the effects of bruises. For the impact of normalization, he continued, developing countries need to strengthen resilience in the face of the impact of the normalization process so that economic recovery and stability are maintained.

In addition, Perry also emphasized the need for more intense cooperation between countries, such as through the Bilateral Currency Swap Arrangement (BCSA) and the use of Local Currency Settlement (LCS) to support trade and investment promotion.

"The strategy related to the scarring effect encourages synergistic and collaborative steps for the roles of all parties," he said.

Domestically, the central bank encourages the strengthening of business and banking strategies through the participation of credit and financing to the real sector.

Meanwhile, the role of government institutions that are members of the Financial System Stability Committee (KSSK) is pursued through policies that encourage financing credit for priority sectors.

"The role of the government is through structural reform programs in providing a conducive investment climate, trade system, taxation, infrastructure, financial digitization and implementation of the Job Creation Act," he stressed.

In this regard, Bank Indonesia is said to have carried out structural reforms in the financial market, deepened financial markets, digitized the payment system, and supported financing efforts for the economy to reduce the scarring effect.