Global uncertainties will continue to bring more pressures to the Indonesian economy. The monetary policy is not enough to cope with the pressures. The policy should be supported by fiscal and non-fiscal measures.
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AP PHOTO/SHUJI KAJIYAMA
People are reflected on an electronic stock board along with global stock indexes at a securities firm in Tokyo, Japan.
JAKARTA, KOMPAS – Global uncertainties will continue to bring more pressures to the Indonesian economy. The monetary policy is not enough to cope with the pressures. The policy should be supported by fiscal and non-fiscal measures.
There are a number of indicators that may cause global uncertainties to remain. In the trade sector, the uncertainties will come from the increase in global crude oil prices and the US-China trade war, while in the financial sector, the uncertainties will come from the continuation of the global uncertainties.
Other factors are the plan of the United States Federal Reserve (the Fed) to raise its benchmark interest rate two more times this year, the plan of the European Central Bank to stop buying bonds in September and the plan of the Central Bank of China (PBoC) to cut its minimum reserve requirement by 50 basis points to add to the liquidity of 17 national banks to reduce the impact of the US-China trade war.
A researcher at the Economic Research Center of Indonesian Institute of Sciences (LIPI), Maxensius Tri Sambodo, told Kompas Sunday that uncertainties in the global economy would continue, adding further pressure to the Indonesian economy. The rupiah will further weaken against the US dollar, depleting foreign exchange reserves, which are quietly needed to stabilize the rupiah and imports, which have significantly increased recently.
Based on the Jakarta Interbank Spot Dollar Rate, the rupiah exchange rate fell to Rp 14,404 per US dollar. At the end of May 2018, the foreign exchange reserves dropped to $122.914 billion.
According to Bloomberg data, WTI and Brent crude oil prices reached $74.15 and $79.23 per barrel on Sunday night.
Last Friday, BI further raised its benchmark interest rate by another 50 basis points to 5.25 percent.
"The monetary policy is not enough to cope with the global uncertainties. The policy should be supported by fiscal and non-fiscal measures," he added.
Maxensius said the fiscal measures could be in the form of the reduction of subsidies and the delay in national projects that are not considered too important. The government is also expected to provide fiscal incentives for the development of special economic zones (KEKs).
According to the LIPI survey, the development of KEKs in Mandalika in West Nusa Tenggara and Tanjung Kelayang in Bangka Belitung has been stalled. The investors of the economic zones are still waiting for fiscal incentives from the government to help them reduce the high construction costs.
"In the real sector, the government needs to accelerate the development of export-based manufacturing industry and import substitution industry. In the short term, the use of local natural resources should be optimized in order to reduce imported raw materials," he said.
ANTARA FOTO/RIVAN AWAL LINGGA
Bank Indonesia Governor Perry Warjiyo (center), accompanied by BI Deputy Governor Erwin Rijanto (left) and Mirza Adityaswara, gives a press statement after holding a board of governors meeting in Jakarta on Friday (29/6/2018). BI decided to raise the benchmark interest rate by 50 basis points to 5.25 percent, its Deposit Facility (DF) rate by 50 bps to 4.50 percent and the Lending Facility (LF) rate by 50 bps to 6 percent.
Last week, Bank Indonesia Governor Perry Warjiyo said that in the short-term, the central bank would focus on efforts to maintain economic stability, especially regarding the rupiah exchange rate against the dollar AS.
Trade Minister Enggartiasto Lukita, who was attending a Comprehensive Regional Economic Partnership (RCEP) meeting in Japan, said ASEAN member countries were committed to further strengthening trade cooperation.
During a bilateral meeting with China, China promised not to reduce the volume of imports from Indonesia. "The Trade Ministry has also asked China to increase its CPO (crude palm oil) import quota from Indonesia by 500,000 tons," Enggartiasto said.
