Encouraging Economic Growth, Economists Value Need To Accelerate Government Expenditures

Senior Economist and Associate Faculty of the Indonesian Banking Development Institute (LPPI) Ryan Kiryanto. (Photo: ANTARA)

JAKARTA - Senior Economist and Associate Faculty of the Indonesian Banking Development Institute (LPPI) Ryan Kiryanto assessed that the monetary policy of Bank Indonesia (BI) which tends to be pro-stability still needs to be accompanied by macroprudential policies that support economic growth.

"In the future, BI will provide space to continue to encourage economic growth through relaxation of monetary policy by sloping BI-Rate if inflation expectations in the future remain under control plus the stability of the rupiah exchange rate is also solid," he said in his statement, Thursday, June 19.

According to him, when monetary policy through the BI-Rate route is on the right track, the opportunity to continue easing on the macroprudential side is also open.

He added that one example is the provision of liquidity incentives to banks, so that the credit expansion space is wider and in terms of financing offers, there are no significant obstacles because the aggregate liquidity condition is still relatively sufficient.

Ryan assessed that the remaining challenge is to encourage credit requests from business actors and households, so that incentives from the fiscal side are needed as an economic stimulus.

According to him, fiscal policies that are countercyclical or pro-growth are very important and strategic, and need to be in line with monetary policies within the framework of a coordinated policy mix.

"The acceleration of government spending absorption (central and regional) must be carried out immediately to create new projects that are capital-intensive and labor-intensive so as to trigger entrepreneurs to start and continue their business activities," he said.

He added that this step is expected to increase the activities of the business world and increase demand for bank credit, as well as encourage funding through capital markets such as the issuance of stocks, bonds, and other debt securities which eventually deepen and strengthen the liquidity of the domestic financial market.

In addition, Ryan added that apart from fiscal policies, the government also needs to present other policies that support the creation of a market climate and conducive investment.

"With this scenario, it is hoped that BI's monetary policy will be really effective in stabilizing the rupiah exchange rate and inflation expectations while simulating economic growth," he concluded.