Super Optimistic Bank Indonesia Looking To 2021

Bank Indonesia Building. (Angga Nugraha / VOI)

JAKARTA - Bank Indonesia (BI) is very optimistic about the economy in 2021. Even though the COVID-19 pandemic has hit the country's economy this year, BI is optimistic that in 2021 there will be significant improvements.

The Governor of Bank Indonesia, Perry Warjiyo, said that the Indonesian economy could still grow 2.3 percent in 2020. The details, growth in the first quarter, 4.3 percent. Then, in the second quarter it contracted to 0.4 percent. Meanwhile, in the third quarter it is estimated that it will reach 1.2 percent, and in the fourth quarter it has increased by 3.1 percent.

Well, he estimates that Indonesia's economic growth in 2021 will be in the range of 6.6 percent to 7.1 percent. One of them, because it is supported by the amount of fiscal stimulus from the government.

Perry explained that the economic growth was based on the assumption that a budget deficit was only 3.4 percent of the Gross Domestic Product (GDP). If the fiscal stimulus is around 3.1 percent of GDP, the growth could reach 6.6 percent.

However, if the fiscal stimulus is 4 percent of GDP, economic growth is projected to reach 7.1 percent, "Perry said in Jakarta, Thursday, April 30.

Regarding the value of the rupiah, the Garuda currency strengthened to Rp14,882 per US dollar on the spot market yesterday. Perry admitted that he was grateful for the strengthening of the exchange rate. Because, so far, the exchange rate movement had reached Rp. 16,000 in mid-March.

"Alhamdulillah, it has succeeded in under Rp. 15,000," he said.

Perry said that one of the factors that supported the strengthening of the rupiah was the relatively high difference in interest rates at home and abroad.

Then, he gave an example, if the Government Securities (SBN) at auction some time ago had touched the yield rate of 8.08 percent, now it has dropped to around 7.97 percent.

"Even then, when compared to the US interest rate, the difference is more than 7.5 percent. So this 7.5 percent will attract inflow into the country, including in SBN," he explained.

BI ensures that the rupiah exchange rate will be maintained and is predicted to be at Rp 15,000 this year.

BI estimates that the rupiah exchange rate will continue to weaken in the second quarter of this year due to the large capital outflow due to the global financial market panic. This is of course due to the market reaction to the outbreak of the COVID-19 corona virus pandemic around the world.

BI Governor, Perry Warjiyo. (Photo: Bank Indonesia)

However, Perry is optimistic that the rupiah exchange rate will tend to strengthen to an average of around Rp. 14,900 to Rp. 15,300 per US dollar in 2021.

"This is in line with the improving global economy, decreasing uncertainty in global financial markets, high investor confidence in Indonesia's economic prospects in 2021 and attractive returns on investment (debt securities) in Indonesia," he explained.

Perry also explained the projected inflation rate in 2021 which is under control in the target range of three percent plus minus one percent.

This projection is supported by inflation expectations that are within the target range, improved supply in line with normal world trade, a stronger exchange rate, and coordination of inflation control policies through the TPI and TPID.