Home MONEY & FINANCE Money Supply Growth Slows in April 2023, but US Dollar Savings Surge

Money Supply Growth Slows in April 2023, but US Dollar Savings Surge

saving money

In April 2023, the growth of money supply in circulation experienced a slowdown, coinciding with the festive period of Eid al-Fitr. However, an interesting trend emerged as savings in the denomination of the US dollar witnessed a sharp increase.

The broad measure of money supply, known as M2, reached Rp 8,350.4 trillion in April 2023, reflecting a year-on-year growth of 5.5%. This growth rate represents the lowest recorded since September 2016, marking a significant shift in the monetary landscape over the past five and a half years.

Notwithstanding the overall slowdown, the nominal money supply in April 2023 showed a positive trajectory, with an increase of Rp 57.1 trillion or 0.69% compared to the previous month.

Delving into the specifics, the narrow measure of money supply, known as M1, displayed a year-on-year growth of 3.4%, which was lower than the growth recorded in March (4.8%). On the other hand, quasi-money experienced a robust expansion of 8.6% year-on-year in April 2023, signifying an 8.0% increase compared to the previous month.

In terms of nominal figures, the recorded M1 circulation amounted to Rp 4,673.3 trillion, while quasi-money reached Rp 3,643.7 trillion.

The unexpected deceleration in the growth of money in circulation during April, particularly during the period encompassing Ramadan and Eid al-Fitr, deviated from the usual trend. Eid al-Fitr is traditionally associated with heightened consumer spending, resulting in a notable surge in money circulation.

Historically, the circulation of money has exhibited a pronounced upswing during Eid al-Fitr. For instance, money in circulation grew by 12.1% during the corresponding period in 2022 and experienced an 8.3% increase in 2021.

Remarkably, one peculiar aspect observed in the money circulation data for April was the substantial increase in savings denominated in US dollars among the public.

Foreign exchange savings, or forex, witnessed a substantial surge of 4.8% year-on-year in April 2023.

In terms of nominal values, forex savings amounted to Rp 182.2 trillion, representing the highest figure recorded in the past five months, since November 2022.

Conversely, the growth of savings denominated in the Indonesian rupiah experienced a decline of 11.4% year-on-year, marking the lowest level observed in the past five months.

Specifically, US dollar-denominated savings accounted for Rp 182.2 trillion in April 2023, marking the lowest figure recorded in the past two months.

The increased preference for US dollar savings can be attributed to the weakening of the Greenback currency, while the Indonesian rupiah strengthened against it.

According to Refinitiv’s data, the rupiah currency exhibited a significant strengthening, with the exchange rate improving from Rp 15,278/US$1 in March to Rp 14,836/US$1 in April 2023.

The dynamics within the realm of savings are juxtaposed with the trends observed in time deposits. The growth rate of foreign currency time deposits weakened to 9.5% year-on-year in April 2023, compared to a growth rate of 17% year-on-year recorded in March.

Meanwhile, time deposits denominated in the Indonesian rupiah experienced a positive growth rate of 4.3% year-on-year in April, surpassing the growth rate of 3.7% year-on-year witnessed in March 2023.

The surge in US dollar savings signals a heightened interest among the public in holding US dollars, highlighting the perceived stability and liquidity of the currency, although these savings can be withdrawn at any time.

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