BI Reveals Global Capital Flow Turns To Gold And Bonds Compared To Shares

Governor of Bank Indonesia Perry Warjiyo. (Photo: Karisa Aurelia Tukan/VOI)

JAKARTA - Bank Indonesia (BI) Governor Perry Warjiyo revealed that there was a change in the global capital flow which was originally focused on the United States (US) financial market, but has now shifted to gold and bond commodities in developed countries and developing countries (emerging markets).

According to Perry, global financial market uncertainty remains high and there is a significant shift in the global investment portfolio.

Previously, he said, almost all investments, including stocks, bonds, and other securities, flowed to the United States, however, currently there is a shift.

"There has been a shift in global portfolio investment, all of which had previously flocked to America. Now there is also a shift for bonds, fixed income securities. Starting from a shift to emerging markets, some have already and also to gold," he said at a press conference, Wednesday, March 19. ,

Meanwhile, Perry said that stock prices in the United States and Asia also experienced a decline, leading to more investment flows leading to developed countries other than the United States.

"For these stocks, in America there has also been a decline in stock prices and in the region there has also been a decline in stock prices. So indeed the stock price has occurred in America and in the Asian region. So that this portfolio investment has more transitioned to developed countries other than America," he explained.

Perry explained that global uncertainty remains high, especially because of the import tariff policy implemented by the United States, which has a significant impact on many countries.

According to him, the main impact of this policy is global economic growth which is estimated to only reach 3.2 percent, with a sizeable impact on world economic growth sources, especially in the United States.

"It seems that in America itself, this is also the carrying capacity of the import tariff policy, the negative impact on economic growth in America is more large than American policy for domestic fiscal stimulus," he said.

Perry said to encourage domestic economic growth, US President Donald Trump implemented tax cuts and import tariff policies.

"This American President Trump for foreign trade charges import rates so that it is to limit imports to there hopes that economic growth will increase. To encourage domestic economic growth, America has also implemented a tax cut in the country," he said.

"We see that the impact of both of them on economic growth has an impact on slowing down in the growth rate in America, so there is now a discussion of market views of the possibility of a recession risk in the United States." he added.

In addition, Perry also highlighted that inflation in America had previously declined rapidly, but now the decline rate has been hampered.

He predicts the Federal Reserve (Fed) will likely only lower interest rates once this year, and will not rush into lowering interest rates further.

"The third thing we have to look at in America is the fiscal deficit which was originally estimated at 7.7 percent. Whereas this year it is likely only 6.4 percent, so the need to issue bonds by America is not as high as it used to be. That's what I said earlier that the global financial market uncertainty remains high." he explained.