Bank Indonesia’s Policies Direction after the Economic Rise

Bank Indonesia

The Indonesian economy recorded beyond expectation result. Indonesia’s economic growth managed to reach 5.44% (year on year/Yoy) in the second quarter of 2022. In this regard, Bank Indonesia focuses its policies on the following matters.

BI Deputy Governor Dody Budi Waluyo in a press release, Tuesday (9/8/2022) explained, “Bank Indonesia’s policy mix is ​​directed at maintaining macroeconomic and financial system stability (pro-stability) through monetary policies, while other policies are directed at maintaining the sustainability of the economic recovery. (pro-growth), as part of the national economic policy mix.”

Dody said that the economic achievement was supported by increased consumption and export performance. Household consumption grew strongly at 5.51% (YoY), well above the previous quarter’s achievement of 4.34% (YoY).

This positive performance was driven by the increase in community mobility in line with the loosening of mobility restrictions and activities related to the celebration of National Religious Holidays (HBKN).

Investment grew at a slower pace of 3.07% (YoY), particularly construction investment, amidst the steady performance of non-construction investment.

Meanwhile, government consumption still contracted by 5.24% (YoY) mainly from a decrease in goods spending for Covid-19 Handling and National Economic Recovery (PC-PEN) in line with the improving conditions of the Covid-19 pandemic.

Export growth recorded an increase of 19.74% (YoY), supported by strong demand from major trading partners. Meanwhile, imports grew strongly by 12.34% (YoY) in line with the improving performance of domestic demand and exports.

Dody sees the risks of a worsening global economy and rising inflation need to be monitored closely and will be responded to by calibrating the policy mix.

“The increase in global inflationary pressure as a result of rising international commodity prices that have an impact on domestic inflation needs to be mitigated by exchange rate stability and policy responses to control inflation expectations and coordination in maintaining supply continuity,” he concluded.

As previously reported, Indonesia’s economy grew 5.44% (year on year/Yoy) in the second quarter of 2022.

If eliminated in 2020-2021 due to the coronavirus pandemic (Coronavirus Disease-2019/Covid-19), the growth in the second quarter of this year is the highest since the fourth quarter of 2013. That is, this growth rate is the highest in 8 years!

The Central Statistics Agency (BPS) today also announced that the Indonesian economy grew 3.72% compared to the previous quarter (quarter to quarter/qtq). For the record, in the first quarter of 2022, the Indonesian economy grew 5.01% (YoY) but contracted 0.95% (qtq).

With growth reaching 5.44% in the first quarter of 2022, Indonesia’s Gross Domestic Product (GDP) has grown above 5% or to its historical level for three consecutive quarters.

The Indonesian economy contracted for four quarters in 2020-2021, namely from the second quarter of 2020 to the first quarter of 2021. The Indonesian economy had indeed shot to the level of 7.07% in the second quarter of 2021.