Heaptalk, Jakarta — Bank Indonesia (BI) forecasted that the archipelago’s economy would continue to perform well, occupying between 4.7% and 5.5% this year. Several factors influenced this evolution, such as tremendous domestic demand for household consumption and investment.
Furthermore, BI observed that the country’s building investment was higher than forecast, backed by the continuation of National Strategic Projects (PSN) in several of Indonesia’s regions and the development of private property as a positive impact of government incentives. Household consumption and non-building investment remain maintained but must be encouraged to support continued national economic recovery.
“Stable domestic demand is reflected in several indicators, including consumer confidence, real sales index, and manufacturing PMI, which are optimistic. Meanwhile, exports of goods are not expected to be strong due to the decline in demand from main trading partner countries, especially CPO, steel, and coal,” said Governor of Bank Indonesia Perry Warijo.
Regarding inflation, Bank Indonesia reported that inflation remained in the range of 2.5+1%. Consumer Price Index inflation was also recorded at 2.75% last February 2024. This output was supported by low core inflation of 1.68% and a decline in administered prices (AP) inflation reaching 1.67% YoY.
Meanwhile, Volatile food (VF) inflation increased to 8.47%, compared to the previous month’s 7.22%. This increase was influenced by El Nino’s impact, seasonal factors, and shifts in the planting season, especially for rice and red chili commodities.
Indonesia’s balance of payments remains stable, supporting external resilience. BI noted that the outlook for the current account balance in the first quarter of 2024 has decreased due to the thinning surplus in the goods trade balance. In February 2024, the trade balance recorded a surplus of US$0.9 billion, compared to the previous month’s surplus of US$2.0 billion.
The rupiah exchange rate is claimed to be relatively stable, influenced by the stabilization policy implemented by BI amidst the dynamics of adjustments to foreign capital flows in the domestic financial market aligned with global financial market uncertainty, which remains high until March 19, 2024. As a result, The Rupiah exchange rate weakened by 2.02% compared to the level at the end of December 2023, more than the Malaysian Ringgit, Korean Won, and Thai Baht, which weakened by 3.02%, 3.87%, and 5.39%, respectively.
The Rupiah exchange rate is predicted to be stable and strengthened, driven by the return of foreign capital inflows, which aligns with the maintained positive perception of Indonesia’s economic prospects. To maintain the stability of the rupiah exchange rate, Bank Indonesia maintains the BI rate at 6.00%, the Deposit Facility interest rate at 5.25%, and the Lending Facility interest rate at 6.75%.
