LPS Chair Predicts Indonesia's Economy Will Continue To Grow Even Though Challenging

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JAKARTA - The increasing geopolitical tension between Russia and Ukraine, the potential for high inflation, the tapering policy of the Central Bank of the United States and the ongoing pressure from the Omicron variant of the COVID-19 pandemic are said to be a series of challenges for the Indonesian economy.

Even so, the Chairman of the Board of Commissioners of the Deposit Insurance Corporation (LPS), Purbaya Yudhi Sadewa, said he was optimistic that the Indonesian economy in 2022 would be able to continue positive growth, while still implementing sound monetary and fiscal policies.

“Some of these things are very challenging and need to continue to be watched and observed. But we are confident that as long as we continue to carry out our monetary policy and fiscal policy well, meaning monetary policy that supports the economy and fiscal policy that also supports the economy, our economy will still grow well," he said, Wednesday 9 March.

Purbaya added, amid the various uncertainties that surfaced, with good policies, Indonesia's economic growth in 2022 could reach 4.8-5.5 percent year on year (yoy), or maybe in the middle of around 5.1. percent for 2022.

"If you look at the monetary side, the amount of money in the system that is really ready to encourage economic growth, the amount is still quite high, above 20 percent growth," said Purbaya.

Regarding the projected trend of deposit and account growth in banking, Purbaya explained, during January 2022, the total value of commercial bank deposits was recorded at Rp. 7,439 trillion, an increase of Rp. 800.4 trillion or an increase of 12.06 percent YoY.

Then, the total value of deposits in tiers with a balance of less than IDR 2 billion experienced an increase of IDR 130.5 trillion, or an increase of 4.53 percent YoY, the value of total deposits in tiers with a balance of more than IDR 2 billion also increased by IDR 669.9 trillion. , or increased by 17.82 percent YoY.

In terms of the number of accounts, in January 2022, the number of accounts with a balance of less than Rp2 billion increased by 91.73 million accounts or increased by 26 percent YoY. Meanwhile, the number of accounts with a balance of more than IDR 2 billion increased by 19 thousand accounts or increased by 6.38 percent YoY.

"It seems that there are new players at low income levels who are starting to take advantage of banking services. I predict this is from high school students who are starting to invest, so they need a bank account,” he added.

In general, customer deposits will continue to grow in line with the economic recovery and maintained public confidence in the banking industry.

Then, regarding the condition of the guarantee interest rate (LPS Rate), based on the LPS evaluation, throughout 2020-2021, LPS has cut the Guarantee Interest Rate (TBP) by 275 bps for rupiah TBP and 150 bps for foreign currency TBP. The current TBP of rupiah for commercial banks and rural banks for the period 29 January 2022 - 27 May 2022 is 3.50 percent and 6.00 percent, respectively, while the foreign currency TBP for commercial banks is 0.25 percent.

“Along with the policy of reducing TBP, interest rates on 1 and 3 month deposits were observed to have decreased by 152 bps and 149 bps, although the decline was slower. This has also contributed to a reduction in the cost of funds for banks, thus supporting a reduction in loan interest rates," he said.