Monday October 15 2018
Indonesia Trade Surplus Narrows Sharply in September
Statistics Indonesia l Chusnul Ch Manan | chusnul@tradingeconomics.com

Indonesia's trade surplus narrowed sharply to USD 0.23 billion in September 2018, from a USD 1.79 billion in the same month a year earlier, missing market consensus of a USD 0.5 billion gap. Exports rose 1.7 percent to USD 14.83 billion while imports increased at a faster 14.18 percent to USD 14.60 billion.

Exports increased 1.70 percent from a year earlier to USD 14.83 billion, far below market consensus of a 7.58 percent rise and after an upwardlly revised 4.52 percent growth in the prior month. Sales of non-oil and gas products went up by 3.78 percent to USD 13.62 billion while those of oil and gas tumbled by 16.99 percent to USD 1.21 billion. 
 
Compared to the previous month, exports dropped 6.58 percent, as non-oil and gas products fell by 5.67 percent and sales oil and gas plunged by 15.81 percent. By categories, outbound shipments declined for: mechanical machines/aircraft (-11.60 percent); jewelery (-20.13 percent); footwear (-13.69 percent); electric machinery and equipment (-11.48 percent); and apparel not knitted (-17.41 percent). By contrast, sales went up for: fruit (14.38 percent); iron and steel (20.23 percent); tin (7.56 percent); ore, metal crust and metal ash (18.86 percent); and pulp (5.65 percent). Sales went down to: China (-8.66 percent); the US (-6.90 percent); Japan (-10.11 percent); Taiwan (-23.43 percent); Singapore (-16.90 percent); Australia (-8.37 percent); Malaysia (-11.84 percent); Germany (-12.19 percent), and the Netherlands (-9.54 percent). Meantime, sales rose to South Korea (13.33 percent); India (3.30 percent); Thailand (0.48 percent); and Italy (6.46 percent).
 
Imports went up at a faster 14.18 percent from a year earlier to USD 14.60 billion in September, following a downwardlly revised 24.49 percent rise in the prior month and far below expectations of a 24.76 percent increase. Purchases of non-oil and gas rose 13.54 percent to USD 12.32 billion while those of oil and gas increased by 17.75 percent to USD 2.28 billion.

Compared to the prior month, imports tumbled by 13.18 percent, with purchases of non-oil and gas slumping 10.52 percent while those of oil and gas plunged by 25.20 percent. Imports went down for all categories: raw material (-13.53 percent); capital goods (-10.45 percent), and consumption goods (-14.97 percent). Among major trading partners, imports declined from: China (-6.42 percent); the US (-1.38 percent); Japan (-13.70 percent); Taiwan (-8.98 percent); South Korea (-9.95 percent); Singapore (-13.31 percent); Thailand (-2.99 percent); Malaysia (-3.10 percent); Germany (-25.07 percent); Australia (-31.64 percent), and India (-15.63 percent). On the other hand, imports rose to Italy (3.44 percent); and the Netherlands (24.45 percent).  

Considering January to September, the trade balance posted a deficit of USD 3.78 billion, compared with a surplus of USD 10.86 billion in the same period of 2017.
 
 




Tuesday October 02 2018
Indonesia Hikes Key Rate by 25 Bps in Expected Move
Bank Indonesia | Gabriela Costa | gabriela.costa@tradingeconomics.com

Bank Indonesia raised its 7-day reverse repurchase rate by 25 bps to 5.75 percent on September 27th, matching expectations. It was the fifth hike in six meetings, in an attempt to support the country's falling currency. The rupiah already weakened nearly 10 percent against the USD since the beginning of the year, reaching its lowest since 1998, amid a higher than expected current account deficit and a continued strengthening of the dollar. The deposit and lending facility rates were also increased by 25 bps to 5 percent and 6.5 percent respectively.

Excerpts from the Bank Indonesia Press Release:

“The decision is consistent with ongoing efforts to lower the current account deficit within a manageable threshold while maintaining the attractiveness of the domestic financial markets, thus further strengthens Indonesia’s external resilience despite widespread global uncertainty. The Government’s seriousness and concrete measures, with Bank Indonesia, to stimulate exports and reduce imports is expected to lower the current account deficit, specifically in 2019, to around 2.5% of GDP. Furthermore, Bank Indonesia will continue to strengthen coordination with the Government and other relevant authorities to maintain economic stability and bolster external resilience. Moving forward, Bank Indonesia will monitor prevailing economic developments, such as the current account deficit, exchange rates, financial system stability and inflation, as follow-up measures to maintain macroeconomic and financial system stability.

The Rupiah has continued to lean against depreciatory pressures, while mitigating volatility. Rupiah depreciation is in line with the currencies of peer countries, spurred by broad US dollar appreciation. Therefore, the Rupiah depreciated by an average of 1.05% in August 2018 but defied pressures in September to close at a level of Rp14,905/USD on 26th September 2018. Year-to-date (ytd), therefore, the Rupiah has lost 8.97% in value against the US dollar as of 26th September 2018, faring better, however, than the Indian rupee, South African rand, Brazilian real and Turkish lira. Moving forward, Bank Indonesia will continue to implement exchange rate stabilisation measures in line with the currency’s fundamental value, while maintaining market mechanisms and financial market deepening efforts. Such policy is aimed to contain Rupiah volatility and liquidity adequacy in the market, to prevent risks on macroeconomic stability and financial system.”

Inflation forecasts remain unchanged at 3.5±1 percent for 2018; and Bank Indonesia projects economic growth in the 5.0-5.4% (yoy) range, subsequently accelerating to 5.1-5.5% (yoy) in 2019.




Monday September 17 2018
Indonesia Trade Balance Swings to Deficit in August
Statistics Indonesia l Chusnul Ch Manan| chusnul@tradingeconomics.com

Indonesia posted a trade deficit USD 1.02 billion in August 2018, swinging from a USD 1.68 billion surplus in the same month a year earlier, compared to market consensus of a USD 0.68 billion gap. It was the second straight month trade gap, mainly due to a surge in imports.

Imports surged 24.65 percent from a year earlier to USD 16.84 billion in August, following a marginally revised 31.73 percent rise in the prior month and below expectations of a 26.53 percent increase. Purchases of non-oil and gas rose 19.97 percent to USD 13.79 billion while those of oil and gas surged by 51.43 percent to USD 3.05 billion.

Compared to the prior month, imports tumbled by 7.97 percent, with purchases of non-oil and gas slumping 11.79 percent while those of oil and gas increasing by 14.50 percent. Imports went down for all categories: raw material (-7.60 percent); capital goods (-8.98 percent), and consumption goods (-9.19 percent). Among major trading partners, imports declined from: China (-7.39 percent); the US (-23.58 percent); Japan (-15.94 percent); Taiwan (-16.39 percent); South Korea (-15.27 percent); Singapore (-10.34 percent); Thailand (-5.89 percent); Malaysia (-18.61 percent); Germany (-16.80 percent); Italy (-32.50 percent); and the Netherlands (-49.40 percent). By contrast, imports rose to Australia (2.61 percent), and India (4.69 percent).

Exports increased at a softer 4.15 percent from a year earlier to USD 15.82 billion, far below market consensus of a 10.03 percent rise and after a marginally revised 19.68 percent growth in the prior month. Sales of non-oil and gas products went up by 3.43 percent to USD 14.43 billion while those of oil and gas increased by 12.24 percent to USD 1.38 billion. 
 
Compared to the previous month, exports fell 2.90 percent, as non-oil and gas products dropped by 2.86 percent and sales oil and gas declined by 3.27 percent. By categories, outbound shipments decreased for: rubber and rubber goods (-776 percent); mineral fuel (-16.25 percent); various chemical products (-7.53 percent); ore, metal crust and metal ash (-11.71 percent); and paper/carton (-9.23 percent). In contrast, sales went up for: electric machinery and equipment (3.47 percent); animal fats and oils (3.47 percent); iron and steel (6.20 percent); tin (20.94 percent), and knitted goods (5.59 percent). Sales went down to: China (-3.81 percent); Japan (-6.82 percent); South Korea (-10.29 percent); India (-0.61 percent); Thailand (-10.24 percent); Taiwan (-6 percent); Singapore (-9.42 percent); and Italy (-5.76 percent). By contrast, sales rose to the US (2.36 percent); Australia (3.73 percent); Malaysia (7.33 percent); Germany (4.02 percent), and the Netherlands (6.65 percent).

Considering January to August, the trade balance posted a deficit of USD 4.09 billion, compared with a surplus of USD 9.07 billion in the same period of 2017.
 
 


Wednesday August 15 2018
Indonesia Hikes Key Interest Rate to 5.5%
Bank Indonesia | Joana Ferreira | joana.ferreira@tradingeconomics.com

Bank Indonesia raised its 7-day reverse repurchase rate by 25 bps to 5.50 percent on August 15th, the fourth hike in less than three months, in an attempt to support the country's falling currency. The decision came after the rupiah weakened to its lowest since October 2015 on the back of Turkey's currency crisis. The deposit and lending facility rates were also increased by 25 bps to 4.75 percent and 6.25 percent respectively.

Excerpts from the Bank Indonesia Press Release:

Multispeed global economic growth has continued to stoke global economic uncertainty. The US economy continues to gain momentum on the back of accelerating consumption and investment. Meanwhile, the economies of Europe, Japan and China are moderating. Consequently, the Federal Reserve is expected to continue raising the Federal Funds Rate (FFR) gradually, contrasting the reluctance of the ECB and BoJ to hikes policy rates. In addition to the recent FFR hikes, widespread global uncertainty has been exacerbated by simmering trade tensions between the US and several other countries, which have triggered retaliatory actions around the world, including currency depreciation despite broad US appreciation. Global uncertainty has also been fuelled by the risk of spillovers from the economic shocks in Turkey caused by domestic economic fragilities and the adverse impact of negative sentiment surrounding the authorities’ policies, as well as looming tensions with the US. Bank Indonesia will remain vigilant of the external risks, including potential spillover from Turkey although sound economic fundamentals in Indonesia are indicative of solid national economic resilience, coupled with avowed policy commitment.

The national economy has accelerated significantly on strong domestic demand fuelled by private and government consumption.  GDP growth was recorded at 5.27% (yoy) in the second quarter of 2018, the fastest rate since 2013. Meanwhile, household consumption stood at 5.14% (yoy), bolstered by rising incomes, upbeat consumers and controlled inflation. In addition, consumption associated with the local elections also posted solid growth. Meanwhile, government spending has also improved, thereby catalysing strong domestic demand. On the other hand, solid investment growth has been maintained despite fewer total work days in June 2018 that restrained growth slightly. Growing domestic demand has prompted a surge of imports against comparatively subdued export performance. Looking forward, Bank Indonesia predicts solid economic growth on sound investment and consumption performance despite limited export gains. Building and nonbuilding investment remain strong, backed by infrastructure development and investment in the manufacturing industry. Meanwhile, several upcoming events, including the general election, are expected to maintain consumption. Consequently, Bank Indonesia projects economic growth in 2018 in the 5.0-5.4% (yoy) range, subsequently accelerating to 5.1-5.5% (yoy) in 2019.


Wednesday August 15 2018
Indonesia Posts Largest Trade Deficit in 5 Years
Statistics Indonesia | Chusnul Ch Manan | chusnul@tradingeconomics.com

Indonesia's trade deficit widened sharply to USD 2.03 billion in July 2018 from USD 0.3 billion in the same month a year earlier, and well above market consensus of a USD 0.6 billion gap. It was the largest trade deficit since July 2013, as imports jumped to a record high.

Imports surged 31.56 percent from a year earlier to an all-time high of USD 18.27 billion in July, following a marginally revised 12.77 percent rise in the prior month and far above expectations of a 14.1 percent increase. Purchases of non-oil and gas jumped 29.28 percent to USD 15.66 billion and those of oil and gas surged by 47.09 percent to USD 2.62 billion.

Compared to the prior month, imports rose sharply by 62.17 percent, whith purchases of non-oil and gas surging 71.54 percent and those of oil and gas increasing by 22.20 percent. Imports went up for all categories: raw material (59.28 percent); capital goods (71.95 percent), and consumption goods (70.50 percent). Among major trading partners, imports rose from: China (93.44 percent); Australia (53.94 percent); Taiwan (99.21 percent); South Korea (62.92 percent); Singapore (31.18 percent); Thailand (33.17 percent); Japan (75.79 percent); Malaysia (108.01 percent); India (47.15 percent); the US (67 percent); Germany (84.72 percent); Italy (92.23 percent); and the Netherlands (8.56 percent).

Exports increased at a softer 19.33 percent from a year earlier to USD 16.24 billion, beating market consensus of a 11.35 percent rise and after a downwardly revised 11.26 percent growth in the prior month. Sales of non-oil and gas products went up by 19.03 percent to USD 14.81 billion, while those of oil and gas jumped by 22.59 percent to USD 1.43 billion. 
 
Compared to the previous month, exports surged 25.19 percent, as non-oil and gas products jumped by 31.18 percent while sales oil and gas slumped by 15.06 percent. By categories, outbound shipments increased for: electric machinery/equipment (37.23 percent); vehicles and parts (67.50 percent); rubber and rubber goods (51.47 percent); mineral fuel (11.90 percent); and animal/vegetable fats and oils (17.91 percent). In contrast, sales decreased for:  air plane and parts (-58.05 percent); fertilizer (-23.92 percent); ore, metal crust and metal ash (-15.99 percent); ships (-58.97 percent); and wheat (-21.65 percent). Exports went up to: China (6.87 percent); Thailand (45.33 percent); Japan (29.46 percent); Taiwan (90.23 percent); Singapore (37.28 percent); Australia (44.10 percent); Malaysia (29.73 percent); South Korea (34.55 percent); India (34.20 percent); the US (37.96 percent); Germany (54.56 percent); the Netherlands (33.17 percent); and Italy (4.29 percent).

Considering January to July, the trade balance posted a deficit of USD 3.09 billion, compared with a surplus of USD 7.39 billion in the same period of 2017.


Monday August 06 2018
Indonesia Economy Expands 4.21% QoQ in Q2
Statistics Indonesia | Chusnul Ch Manan | chusnul@tradingeconomics.com

Indonesia's gross domestic product grew 4.21 percent quarter-on-quarter in the three months to June of 2018, following a marginally revised 0.41 percent decline in the previous period and beating market consensus of a 4.08 percent expansion. It was the strongest growth rate since the series began in 2005, supported by a rebound in government spending and fixed investment and a faster increase in private consumption.

On the expenditure side, government spending surged 32.52 percent in the second quarter, after a 46.09 percent drop in the previous period; and fixed investment rose 0.97 percent, compared with a 4.86 percent fall in Q1. In addition, private consumption went up 1.54 percent, after increasing by just 0.1 percent in the preceding quarter. On the other hand, net external demand contributed negatively to GDP growth, as exports continued to decline (-0.89 percent vs -1.11 percent in Q1) while imports rose slightly (0.48 percent vs -3.96 percent in Q1).

On the production side, output rebounded for: electricity and gas (3.09 percent vs -2.47 percent in Q1); mining and quarrying (2.23 percent vs -0.60 percent); transportation and storage (3.01 percent vs -0.45 percent); education (3.15 percent vs -11.35 percent); public administration (1.46 percent vs -8.91 percent); construction (0.94 percent vs -4.60 percent); human health and social work activities (1.55 percent vs -2.00 percent); water supply, sewerage, waste management and remediation activities (1.61 percent vs -1.16 percent). Also, output increased faster for: manufacturing (2.17 percent vs 0.76 percent); wholesale and retail trade, repair of motor vehicles and motorcycles (3.19 percent vs 0.43 percent); accommodation and food service (1.96 percent vs 0.59 percent); information and communication (2.13 percent vs 1.05 percent); business activities (3.37 percent vs 1.12 percent); and other services (3.30 percent vs 1.37 percent). On the other hand, output expanded at a softer rate for: agriculture, forestry and fishing (9.93 percent vs 16.53 percent); financial and insurance activities (0.67 percent vs 2.38 percent); and real estate (0.92 percent vs 1.30 percent).
 
Year-on-year, the economy grew 5.27 percent in the second quarter, accelerating from a 5.06 percent growth in the previous period and beating market expectations of 5.16 percent. It was the highest growth rate since the December quarter of 2013.




Monday August 06 2018
Indonesia Q2 GDP Growth Strongest in 4-1/2 Years
Statistics Indonesia | Rida | rida@tradingeconomics.com

The Indonesian economy advanced 5.27 percent year-on-year in the second quarter of 2018, beating market consensus of 5.16 percent and following a 5.06 percent growth in the previous period. It was the strongest pace of expansion since the last quarter of 2013, driven by faster rises in private consumption and government spending while fixed investment grew firmly.

On the expenditure side, household consumption rose 5.14 percent in the second quarter, after a 4.95 percent increase in the previous period; and government spending climbed 5.26 percent, compared with a 2.74 percent advance in Q1. Meantime, fixed-investment went up 5.87 percent, easing from a 7.95 percent jump in the March quarter. Net external demand contributed negatively to GDP growth, as exports increased by 7.70 percent (vs 6.09 percent in Q1) while imports went up at a faster 15.17 percent (vs 12.66 percent in Q1). 

On the production side, output growth accelerated for: agriculture (4.76 percent vs 3.29 percent); mining and quarrying (2.21 percent vs 0.74 percent); electricity and gas (7.56 percent vs 3.31 percent);  water and waste management (3.94 percent vs 3.59 percent); wholesale and retail trade (5.24 percent vs 4.93 percent); accommodation & food and beverages (5.75 percent vs 5.45 percent); business services (8.89 percent vs 8.04 percent); public administration, defense and social security (7.20 percent vs 5.79 percent); education (4.94 percent vs 4.83 percent); health and social services (7.07 percent vs 6.06 percet); and other services (9.22 percent vs 8.42 percent). In addition, output continued to grow firmly for: manufacturing (3.97 percent vs 4.56 percent); construction (5.73 percent vs 7.35 percent); transportation (8.59 percent, the same as in Q1); information and communication (6.06 percent vs 8.52 percent); financial and insurance servives (3.02 percent vs 4.33 percent); and real estate (3.11 percent vs 3.23 percent).

On a quarterly basis, the economy expanded 4.21 percent in the three months to June, also beating market expectations of 4.08 percent and recovering from a 0.42 percent contraction in the previous period. It is the first quarterly growth since the third quarter of 2017 and the fastest on record, helped by seasonal spending during the Muslim fasting month and holiday festivities.

For 2018, the government still expects the economy to grow by 5.4 percent though officials have said the latest outlook is 5.2 percent. The central bank's 2018 forecast is between 5.1-5.2 percent.




Thursday July 19 2018
Indonesia Leaves Monetary Policy Unchanged
Bank Indonesia | Gabriela Costa | gabriela.costa@tradingeconomics.com

The central bank of Indonesia held its benchmark 7-day reverse repo rate at 5.25 percent on July 19th as widely expected. It follows three consecutive rate hikes to support the rupiah which already fell almost 6 percent in 2018 and is trading at its weakest level in near three years. However, the currency has been stable since the end of June when policymakers last hike borrowing costs by 50bps.

The lending and the deposit facility rates were also left steady at 6 percent and 4.5 percent, respectively.

Excerpts from the Bank Indonesia Press Release:

“The policy is consistent with efforts by Bank Indonesia to maintain domestic financial market attractiveness against a backdrop of pervasive uncertainty blighting the global financial markets in order to maintain stability in general and Rupiah exchange rate stability in particular. Bank Indonesia believes that the macro prudential policy easing measures are able to increase liquidity management flexibility as well as banking intermediation for economic growth. Bank Indonesia also strengthens coordination with the government and other related authorities to maintain stability and implementation of structural reform to reduce current account deficit, including foreign exchange from tourism and private sector infrastructure financing. Moving forward, Bank Indonesia will continue to monitor the global and domestic economic developments and outlook in order to strengthen policy mix response in maintaining domestic financial market attractiveness.

The Rupiah experienced depreciatory pressures against broad USD appreciation. The Rupiah strengthened at the beginning of July 2018 in response to Bank Indonesia’s pre-emptive, front-loading and ahead-of-the-curve monetary policy instituted at the Board of Governors’ meeting (RDG) held in June 2018 through a 50bps hike in the BI 7-Day (Reverse) Repo Rate. The favorable market response drew non-resident capital inflows to domestic financial markets, especially tradable government securities (SBN), thus prompting Rupiah appreciation. Pressures on the Rupiah re-emerged as uncertainty enveloped the global financial markets, which triggered broad USD appreciation. On 18th July 2018, the Rupiah stood at Rp14,405/USD, down 0.52% (ptp) on the level recorded at the end of June 2018. Consequently, the Rupiah has depreciated by 5.81% (ytd) on the level posted at the end of 2017, not as severe as reported in other developing economies, including the Philippines, India, South Africa, Brazil and Turkey. Moving forward, Bank Indonesia will remain vigilant of global financial market uncertainty risks, while maintaining the Rupiah exchange rate in line with the currency’s fundamental value, backed by financial market deepening efforts. The policies remain backed by double intervention strategies and monetary operation strategies to maintain adequate liquidity, especially in the Rupiah and interbank swap markets.”

Inflation (3.5±1 percent) and economic growth (5.1-5.5%) forecasts for 2018 were kept unchanged.


Monday July 16 2018
Indonesia Posts Trade Surplus for 1st Time in 3 Months
Statistics Indonesia l Chusnul Ch Manan| chusnul@tradingeconomics.com

Indonesia recorded a trade surplus of USD 1.70 billion in June of 2018 from a USD 1.67 billion surplus a year earlier and beating market estimates of a USD 0.65 billion surplus. It is the first trade surplus since March, mainly due to a slowdown in imports.

In June, exports increased 11.47 percent from a year earlier to 13 USD billion, below market consensus of a 17.53 percent rise and after an upwardly revised 13.01 percent growth in the prior month. Sales of non-oil and gas products went up by 8.61 percent to 11.28 USD billion, while those of oil and gas jumped by 34.79 percent to 1.72USD billion. There were fewer working days in June due to Eid al-Fitr. 
 
Compared to the previous month, exports tumbled 19.80 percent, as non-oil and gas products decreased sharply by 22.67 percent while sales oil and gas went up by 4.67 percent. By categories, outbound shipments dropped for: machinery/electrical equipment (-27.58 percent); machines/mechanical aircraft (-35.23 percent); vehicles and parts thereof (-36.21 percent); wood, wooden goods (-43.23 percent); rubber and rubber goods (-31.30 percent), and fertilizer (-81.65 percent). In contrast, sales increased for:  mineral fuel (6.11 percent); pulp (13.63 percent); nickel (5.83 percent), and various chemical products (0.65 percent). 

Sales went down to : China (-1.99 percent); the US (-27.90 percent); Thailand (-34.44 percent); Germany (-42.26 percent), Japan (-11.99 percent); Netherlands (-40.31 percent); India (-14.44 percent); Italy (-16.78 percent), and Taiwan (-40.64 percent); Singapore (-32.82 percent); Australia (-30.56 percent); Malaysia (-20.54 percent), and South Korea (-12.01 percent).

Imports increased 12.66 percent to 11.26 USD billion, following an upwardly revised 28.25 percent jump in the prior month and below estimates of a 31.31 percent increase. Purchases of non-oil and gas went up 8.95 percent to 9.14 billion and those of oil and gas jumped by 32.09 percent to 2.11 USD billion.
 
Compared to the prior month, imports tumbled by 36.27 percent. While purchases of non-oil and gas decreased sharply 38.23 percent, those of oil and gas tumbled by 26.11 percent. Imports went down for all categories : raw material (-36.21 percent to 8.51 USD billion); capital goods (-37.81 percent to 1.74 USD billion), and consumption goods (-41.85 percent to 1.01 USD billion).
  
Imports fell from: China (-50.35 percent); Australia (-27.58 percent); Taiwan (-49.77 percent); South Korea (-32.03 percent); Germany (-32.75 percent); Singapore (-10.19 percent); Thailand (-31.68 percent), and Italy (-60.89 percent); the US (-27.67 percent); Japan (-35.63 percent); Malaysia (-42.53 percent); India (-24.46 percent). In contrast, imports rose to Netherlands (73.77 percent).

Considering the first half of 2018, trade balance posted a deficit USD 1.02 billion, swinging from USD 7.67 billion surplus in the same period of 2017, as imports surged 23.10 percent to USD 89.04 billion and exports rose at a slower 10.03 percent to USD 88.02 billion.
 
 
 
 


Friday June 29 2018
Indonesia Hikes Key Interest Rate for 3rd Consecutive Time
Bank Indonesia | Gabriela Costa | gabriela.costa@tradingeconomics.com

The Bank Indonesia raised its benchmark 7-day reverse repo rate by 50 bps to 5.25 percent at its June meeting, while markets were expecting a smaller 25 bps hike. It was the third rate increase in six weeks in an attempt to stabilise the volatile rupiah, which has weakened this month despite the two rate hikes in May.

The lending and the deposit facility rates were also raised by 50bps to 6.0 percent and 4.5 percent respectively.

Excerpts from the Bank Indonesia Press Release:

"The policy raise hike decision is Bank Indonesia’s pre-emptive, front-loading, and ahead of the curve move to maintain the domestic financial market’s competitiveness against several countries’ changing monetary policies as well as high global uncertainty. The policy is still backed by dual intervention policy in the foreign exchange market and government securities (SBN) market as well as the monetary operations strategy to maintain adequate liquidity, particularly in the rupiah money market and interbank swap market. Bank Indonesia is confident that the policy measures will effectively strengthen economic stability, specifically the Rupiah exchange rate stability. Moving forward, Bank Indonesia will continue to monitor the domestic and global economic developments and outlook, to strengthen future policy mix responses.

Rupiah exchange rates defied depreciatory pressures in June 2018, which intensified in the second half of the month as the USD strengthened globally. The rupiah appreciated until the middle of June 2018, hitting Rp13,853/USD on 6th June, in line with Bank Indonesia’s pre-emptive, front-loading and ahead-of-the-curve policy response taken at the end of May 2018. Nevertheless, the more aggressive change in stance adopted by the Federal Reserve at the Federal Open Market Committee (FOMC) meeting in the middle of June, combined with the changing central bank policy response in other countries, specifically in Europe and China, as well as global financial market uncertainty, triggered depreciation nearly all global currencies, including the Rupiah. On 28th June 2018, the rupiah stood at Rp14,390/USD, falling 3.44% (ptp) on the level recorded at the end of May 2018. Compared with conditions at the end of December 2017, the rupiah has fallen 5.72% (ytd), which is less severe than the depreciation experienced in other developing economies, such as The Philippines, India, South Africa, Brazil, and Turkey. Bank Indonesia will remain vigilant of the global financial market uncertainty, while continuing to stabilise the rupiah in line with the currency’s fundamental value and maintaining market mechanisms, backed by financial market deepening efforts.

Inflation (3.5±1 percent) and economic growth (5.1-5.5%) forecasts for 2018 were kept unchanged.