Bank Indonesia (BI) has recently released a report highlighting the evolving liquidity landscape of the Indonesian economy, specifically focusing on broad money or M2. In July 2023, M2 reached an impressive Rp8,350.5 trillion, demonstrating a robust growth rate of 6.4 percent when compared to the same period in the previous year.
Erwin Haryono, who serves as the Head of BI’s Communication Department, underlined the significance of this development, emphasizing that it outpaced the growth recorded in the prior month, which stood at 6.1 percent (year-on-year or yoy).
Haryono noted, “This notable progress can be chiefly attributed to the remarkable 9.4 percent (yoy) expansion in quasi-money,” during a formal statement issued on Monday, August 28, 2023.
Within the landscape of M2 broad money, quasi-money held a dominant position, accounting for a substantial 44.0 percent share. Its total value in July 2023 amounted to a staggering Rp3,675.7 trillion, reflecting a robust 9.4 percent (yoy) increase. This uptick followed a similar trend observed in the previous month when quasi-money expanded by 9.2 percent (yoy).
The surge in quasi-money was largely propelled by the remarkable 6.8 percent (yoy) growth in time deposits during July 2023, succeeding the 7.1 percent (yoy) expansion witnessed in June 2023.
Meanwhile, the more specific category of narrow money, denoted as M1, exhibited a 4.1 percent (yoy) growth rate in July 2023, an improvement compared to the 3.9 percent (yoy) increase observed in the preceding month.
The boost in M1 can be attributed primarily to the increase in demand deposits, marking a growth rate of 1.8 percent, and checking accounts in rupiah, which expanded by an impressive 7.5 percent.
Haryono elucidated that this surge in M2 in July 2023 was significantly driven by developments in credit distribution. It was observed that during this month, credit distribution grew by an impressive 8.5 percent (yoy), demonstrating a notable increase when compared to the 7.8 percent (yoy) growth rate in June 2023.
Conversely, net foreign assets experienced a substantial growth rate of 9.0 percent (yoy) during this period, surpassing the previous month’s growth rate of 3.1 percent (yoy).
On the other hand, net claims on the Central Government (Pempus) contracted by a substantial 12.1 percent (yoy) in July 2023, following a growth rate of 1.7 percent (yoy) in the prior month.
This comprehensive overview of the liquidity dynamics in Indonesia underscores the dynamic nature of its economy, showcasing the interplay of various factors and components within the financial system.