SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia
BANK INDONESIA'S
ANNUAL MEETING
2019

BANK INDONESIA'S
ANNUAL MEETING
2019
TABLE OF CONTENTS
Greetings 5
Introduction 6
Global Economy: Diminishing Globalisation, Increasing Digitalisation 7
Three Important Lessons: Synergy, Transformation, and Innovation 10
Solid Economic Performance, Promising Economic Outlook 12
Bank Indonesia Policy Mix: Maintaining Stability, Boosting Growth Momentum 20
Bank Indonesia will Maintain an Accommodative Monetary Policy Stance in 2020 21
Accommodative Macroprudential Policy for Driving Economic Financing 22
Accelerating Financial Market Deepening 24
Payment System Policy for Electronification and Economic Efficiency 24
Payment System Innovation: Integration of Digital Economy and Finance 25
Empowering the Islamic Economy and MSMEs 30
Strengthening International Policy and Institution 30
Strengthening Synergy for Resilience, Economic Transformation, and Digital Innovation 31
"SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia"
Speech of the Governor of Bank Indonesia
BANK INDONESIA'S ANNUAL MEETING
Jakarta, 28th November 2019
His Excellency:
• President of the Republic of Indonesia, Mr. Joko Widodo;
Honourable guests:
• Leaders and Members of the House of Representatives and House of Regional Representatives
of the Republic of Indonesia;
• Leaders of State Institutions;
• Ministers of Indonesia Maju Cabinet;
• Chairman and Members of the Board of the Financial Services Authority (OJK) and Deposit
Insurance Corporation (LPS);
• Former Governors and Board members of Bank Indonesia;
• Provincial Governors from all across Indonesia;
• Leaders of the Banking Industry, Corporate Sector and National Media;
• Awardees of 2019 Bank Indonesia Award;
• Distinguished Ladies and Gentlemen.
BANK INDONESIA'S
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Assalamu'alaikum Warahmatullahi Wabarakaatuh,
Salam Sejahtera for all of us,
Om Swastyastu, Namo Buddhaya,
Salam Kebajikan, Syalom
Let me begin by praising Allah SWT, God Almighty, for it is with His blessings that we can assemble
here at the 2019 Bank Indonesia's Annual Meeting. I also offer my sincerest appreciation to the
President of the Republic of Indonesia for his esteemed presence this evening along with all the
invited participants.
I would like to congratulate 39 awardees of 2019 Bank Indonesia Award. Banks, corporates and
individuals in four areas and 14 categories ranging from monetary and financial system stability
management, payment system and rupiah currency management, those supporting Bank
Indonesia policy as well as individual contributions. The awards are organised annually, as part of
the Bank Indonesia's Annual Meeting, as a form of appreciation and national recognition to our
stakeholders who have been continously supporting Bank Indonesia.
I would also like to take this opportunity to deliver our assessment on Indonesia's economic
performance in 2019 as well as the economic outlook and Bank Indonesia policy direction in 2020
that we have summarised under the theme "Synergy, Transformation, and Innovation Toward
an Advanced Indonesia". We consider this a pertinent theme as a strategy to overcome global
economic headwinds to strengthen external resilience and boost national economic growth
momentum toward an advanced nation in 2045. This is also a representation of Bank Indonesia's
accountability and transparency as mandated by the Bank Indonesia Act.
SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia
Global Economy: Diminishing growth toward a high-income advanced
Globalisation, Increasing Digitalisation economy by 2045. There are no less than five
key characteristics that demand vigilance as
The global economy has become more follows:
unfavorable in 2019. The ongoing trade
war between the United States and China First, global economic growth declined
and several other countries has continued to sharply in 2019, and may not be recovered
escalate, with anti-globalisation sentiment in 2020. The trade war has had a devastating
taking precedence along with inward- impact on the economy, not only in the
looking policies. The Brexit issue in the UK has countries involved but also affecting all
reached an impasse, while other geopolitical countries around the world. The International
risks continue to emerge. At the same time, Monetary Fund (IMF) and several other
economic and financial digitalisation is taking international organisations have, from time
place rapidly - bringing with it all the benefits to time, revised down growth projections,
and risks - penetrating various economic for some countries and also global economy.
segments with control increasingly in the The nature of the slowdown also shifts from
hands of big tech. The current phenomenon uneven global growth to a synchronised global
of diminishing globalisation coupled with slowdown. Bank Indonesia projects a global
increasing digitalisation is expected to persist economic slowdown from 3.6% in 2018 to just
into 2020 and beyond. Consequently, we 3.0% in 2019 and 3.1% in 2020 in the absence
must consider such phenomena in terms of of prolonged trade conflict (Table 1). Economic
strengthening resilience and national economic growth in the United States, China as well as
Table 1. Global Economy: Economic Growth, Trade Volume, and Commodity Prices (%, yoy)
2018 2019* 2020*
World Economic Growth 3.6 3.0 3.1
Advanced Economies 2.2 1.7 1.5
United States 2.9 2.3 2.0
Euro Area 1.8 1.0 1.0
Japan 0.8 0.6 0.5
Emerging Economies 4.5 3.9 4.1
China 6.6 6.2 6.0
India 7.4 5.9 6.6
Latin America 1.0 0.5 1.8
World Trade Volume 3.4 -0.3 0.2
Indonesia Export Commodity Price Index -2.8 -4.1 -0.9
Source: World Economic Outlook (WEO) Database, October 2019, Bank Indonesia Projection Notes: *Projected
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many advanced and developing economies persisted with qualitative and quantitative
are moderating. In fact, the threat of recession easing since the global financial crisis in 2008.
looms large in several countries. In addition, Unfortunately, the range of conventional and
global economic moderation has suppressed unconventional policy measures taken has not
world trade volume and international succeeded in supporting the global economy.
commodity prices (Table 1). This reminds us to Central banks cannot be "the only game in
the warning given by President Joko Widodo at town" in dealing with trade war fallout. A
the IMF-World Bank Annual Meetings in Bali in synergy in the form of national economic policy
October 2018, referring to the impact of the war mix is required, encompassing fiscal stimuli and
in the Game of Thrones, has become a reality. economic reforms in the real sector, to underpin
The winter indeed has arrived and we must be economic growth.
prepared to face the cold.
Third, volatility in foreign capital flows and
Second, monetary policy by itself may not exchange rates in global financial markets
always be effective in addressing the adverse persists. Liquidity injections coupled with
impacts of the trade dispute. The US Federal low interest rates in advanced economies
Reserve, raised its policy rate in 2018 as part have encouraged global investors to seek
of its monetary policy normalisation, and then more attractive yields in emerging markets
subsequently backtracked and has reduced (EMs), including Indonesia, in the form of
the Federal Funds Rate (FFR) three times since portfolio investments in stocks, bonds, and
July 2019 by a total of 75bps in order to ease other securities. The volatility of such capital
its monetary policy stance (Graph 1). With zero flows is relatively high, amplified by economic
and even negative interest rates, the European dynamics, the direction of monetary policy,
Central Bank (ECB) has also continued its and global financial market uncertainty
accomodative policy by expanding the balance (Graph 3). Volatile foreign capital flows have
sheet through liquidity injections (Graph 2). triggered exchange rate volatility in emerging
Furthermore, the Bank of Japan (BOJ) has also markets, including rupiah. Furthermore, with
Graph 2. Central Bank Liquidity Injection
Graph 1. Central Bank Policy Rate Cuts
USD Trillion (%, yoy)
(%)
6 20 50
5
40
16
4
30
12
3
20
2
8
10
1
4
0
0
- -10
-1
2 6 10 2 6 10 2 6 10 2 6 10 2 6 10 2 6 10 2 6 10 2 6 10 2 6 10 2 6 10 2 6 10 2 6 10 10
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
FFRT - Lower Target ECB Main Refinancing Operation
Fed ECB BoJ Asset Growth (rhs)
BOJ Rate BOE Rate
Source: FRED, calculated
Source: Bloomberg, calculated
SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia
Graph 4. Interest Rate Differential and Rupiah Exchange
US economy still outperforming others and a
Rate Movements
(%, yoy)
(%)
recent change in monetary policy direction,
30
18
the US dollar remains strong and affects
16
20
performance of other currency. Exchange 14
10
12
rate volatility, including the rupiah, is not only
0
10
driven by interest rate parity condition, but also
8
-10
investment risk premium (Graph 4). Maintaining 6
-20
4
an attractiveness yields is important, yet it is
-30
2
also crucial to strengthen positive sentiment
0 -40
on policy credibility and the national economic 2001 2004 2007 2010 2013 2016 2019
Interest Rate Differential Rupiah Spot Exchange Rate (rhs)
outlook. Consequently, various economic
Source: CEIC, calculated
reform policies will be continued to improve
the ease of doing business, and therefore technological innovation has led to the rapid
encourage more foreign capital to Indonesia, in development of fintech in the payment system
particular foreign direct investment (FDI). and in various other financial services, such as
crowdfunding, peer-to-peer lending, insurance,
Fourth, economic and financial digitalisation and wealth management (Graph 5). Such
is growing exponentially. The advancement financial services, which used to be conducted
of digital technology is extraordinary, from the by banks and other financial institutions, are
internet of things to artificial intelligence (AI), further developed and taken over by fintech,
block chains, distributed ledger technology prompting a risk from shadow banking.
(DLT), and robotics. Digital technology has Moreover, sizeable investment in digital
fundamentally disrupted production processes technology has precipitated the emergence
in the industry 4.0 era, along with retail trade of giant world-class corporation, or a big tech
through e-commerce, as well as health, (Graph 6). Big tech is dominating business in
education, and various other segments in our digital economy and finance across the globe.
everyday lives. In the financial world, digital Some have even issued private virtual or
Graph 3. Increasing Portfolio Investment Volatility
Graph 5. Types of Big Tech Financial Services
USD billion 10
150
Global
8
Financial
100
6
Crisis
50
4
0
2
-50
0
-100
Apple
Kakao
Paypal
(Baidu)
-150 Google
Tencent
Amazon
Financial
Xiaoman Samsung
Facebook
-200 Art Du
Financial
-250
Wealth Management Credit Insurance
2011 Other Payments
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2017 2018 2019
Source: Big Tech in Finance: Market Developments and Potential Financial Stability Implications,
Source: World Economic Outlook (WEO) Database, October 2019, calculated
Financial Stability Board (August 2019)
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crypto-currency, which is encroaching upon online transactions, rather than visiting
the mandate of the central bank. This raises the brickand-mortar stores, restaurants, or banks. As
question of what policies are required to ensure employees, millennials tend to be smart,
the rapid development of the digital economy innovative and extroverted but with short
and finance remains aligned with the national attention spans and uninterested in being
interest as a new source of economic growth told what to do. Millennials have strong
moving forward, thus accelerating financial and development potential in terms of start-ups as
economic inclusion. Not only that, the risk of big well as e-commerce and fintech. The changes
tech dominating the business and controlling that we are witnessing in this digital era
granular data also demands vigilance due to require business models to evolve, while also
the potential threat to fair business competition upgrading the skills of the workforce.
and discourage innovation.
Three Important Lessons: Synergy,
Fifth, digital technology is also changing Transformation, and Innovation
human behaviour as consumers and
employees. This is congruent with the What do we need to do in the face of declining
demography of Indonesia, where millennials globalisation and increasing digitalisation
account for more than 50% of the with the five key characteristics mentioned
workingage population according to 2018 data from previously? Synergy, transformation, and
the Ministry of Women's Empowerment and innovation are three keywords to strengthen
BPS-Statistics Indonesia. Technology adoption resilience and economic growth toward an
is much faster amongst millennials, including advanced Indonesia.
mobile phones and social media (Graph 7 and
8). As consumers, they demand affordable We have synergised macroeconomic
products and services in real-time, affordable and financial system policy mix among
and tailored to their specific tastes through the Government, Bank Indonesia and
Graph 6. Active Users of Big Tech Companies Graph 7. Mobile Phone Penetration in Indonesia (%)
Billions Billions
2.0 0.06 94.87
91.62
87.65
83.06
77.02
1.5 0.05
70.08
1.0 0.03 51.25
43.72
36.13
0.5 0.02
0.0 0.00
2004 2006 2008 2010 2012 2014 2016 2018
Urban Rural Total
lhs: Alibaba Tencent rhs: Groupon
Y Generation (Millenial) X Generation Baby Boomers + Veteran Generation
Facebook Kakao
Source: BIS Annual Economic Report 2019
Source: National Social Economic Survey 2017, BPS
SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia
Graph 8. Purpose of Internet Access
low commodity prices, and the ongoing trade
Amongst Millenials (%)
83.23
war, we must continue to develop new domestic
sources of growth. We will continue to stimulate
68.01
consumption and investment. While economic
transformation will focus on manufacturing,
46.81
particularly automotive, clothing, electronics,
and food, as well as development of 10 new
22.04 21.84
travel destinations (New Bali) along with the
12.51
9.23
maritime, agricultural and MSME sectors. The
5.29
4.53
2.11
development of economic zones and clusters
Getting Doing Sending/ Social Media/ Goods/ Goods/ Entertainment Financial Getting Others
Information/ School/ Receiving Social Services Services Facility Information
News College E-mail Network Purchasing Selling about
Task Goods/ should focus on these priority sectors. The
Services
Source: National Social Economic Survey 2017, BPS
acceleration of connectivity infrastructure
Indonesian Financial Services Authority development must continue, mainly to support
(OJK) in order to strengthen national the development of the priority sectors, with
economic resilience. The world is becoming more financing coming from domestic and
an increasingly uncertain place, with global foreign private investors. In doing so, further
economic moderation together with volatile investment climate improvements could be
capital flows and exchange rates, which has achieved by streamlining investment licensing,
exposed vulnerabilities and risks to crises. The particularly in the priority economic zones, thus
national economic resilience we have worked boosting FDI in Indonesia. Similarly, various tax
hard to achieve must be maintained. We have facilities that have been implemented will also
achieved and maintained low inflation, stable be supported by upcoming new tax facilities.
exchange rates, a manageable current account Meanwhile, we need to stimulate exports by
deficit, a safe fiscal deficit, and stable financial accelerating downstream processing industries
system. In achieveing the resilience, Bank in order to increase value-added and the
Indonesia cannot work alone with its monetary competitiveness of natural resources as well as
and macroprudential policy mix. Close synergy through international trade, including bilateral
is therefore required with the fiscal policies and regional trade and unlocking new markets.
of the government and microprudential
supervision by OJK. The macroeconomic and We are nurturing innovation in the digital
financial system policy mix is prioritised and economy and finance. The rapid wave
optimised for stability, while actively seeking of digitalisation has provided Indonesia
the opportunity to boost economic growth the opportunity to create sustainable and
momentum. inclusive economic growth. Digital innovation
can strengthen linkages between economic
Strengthen economic transformation agents, from the smallest to the largest, from
toward higher growth. As global economy is individual consumers and MSMEs to large
overshadowed by dwindling global demand, corporations. Furthermore, economic and
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financial digitalisation unlocks the potential of contrast to a number of other countries have
economic and financial inclusion, thus bridging experienced recessions or even slipped into
the economic inequality gap. Therefore, crisis.
innovation in the digital economy and finance
is required through start-up development The solid economic growth achieved in
in various segments, including the payment 2019 is projected to accelerate in 2020.
system, financial services, the retail economy, Annually, the first three quarters of 2019
and MSMEs. A business ecosystem in the digital recorded economic growth of 5.07%, 5.05%,
economy and finance, encompassing various and 5.02% respectively. Unfortunately,
segments, such as the banking industry, despite the various stimuli introduced, global
fintech, and e-commerce, integrated with economic moderation has restricted our
national unicorns, is also required to strengthen ability to expand as expected. Nevertheless,
competitiveness in the national interest in the household consumption remains stable,
face of the current domination by global big supported by low inflation and government's
tech. In addition, the availability of public data social assistance program (bansos) as well as
infrastructure is a key factor to ensure universal growing upper middle income class. Building
access to granular data and information, investment growth remains solid, buoyed
with adequate confidential and private by the development of national strategic
data protection to ensure the sustainability infrastructure projects. Meanwhile, non-
of economic and financial innovation and building investment remains sluggish despite
inclusion. the latest survey conducted by Bank Indonesia
point to a rebound in the last quarter of
Solid Economic Performance, Promising 2019, supported by improvement in business
Economic Outlook confidence. The export performance has yet to
improve due to dwindling global demand and
We are grateful that against a backdrop of sliding international commodity prices. Moving
global economic moderation, Indonesia has forward, the policy mix instituted by Bank
maintained solid economic performance with Indonesia and the Government is expected
a promising economic outlook. Furthermore, to maintain national economic growth
national economic stability has been momentum, which Bank Indonesia predicts
maintained along with growth momentum. around 5.1% in 2019 before increasing toward
What we have achieved as a country is in 5.1-5.5% range in 2020 (Table 2).
SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia
Table 2. National Economic Growth (%, yoy)
2018 2019
Component 2019* 2020*
I II III IV Total I II III
GDP 5.06 5.27 5.17 5.18 5.17 5.07 5.05 5.02 Around 5.1 5.1 - 5.5
Household
4.94 5.16 5.00 5.08 5.05 5.02 5.17 5.01 5.0 - 5.4 4.9 - 5.3
Consumption
Government
2.71 5.20 6.27 4.56 4.80 5.20 8.25 0.98 4.0 - 4.4 3.0 - 3.4
Consumption
Investment 7.94 5.85 6.96 6.01 6.67 5.03 5.01 4.21 4.6 - 5.0 5.4 - 5.8
Exports 5.94 7.65 8.08 4.33 6.48 -1.87 -1.98 0.02 -1.0 - -0.6 2.3 - 2.7
Imports 12.64 15.17 14.02 7.10 12.04 -7.39 -6.78 -8.61 -6.8 - -6.4 0.9 - 1.3
Source: BPS-Statistics Indonesia and Bank Indonesia Projections Notes: *Projected
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Graph 9. Regional Economic Growth in Q3-2019 (%, yoy)
Kalimantan Kalimantan (8%) (8%)
Sumatra Sumatra (22%) (22%)
5.92 5.92
5.59
5.49 5.49 5.59 5.41
5.41
4.71 4.71
ACEH ACEH
3.52 3.52
4.61 4.61
3.76 3.76
4.55 4.55
4.49
4.49
4.46 4.46
NORTH
NORTH NORTH NORTH
KALIMANTAN KALIMANTAN
SUMATRA SUMATRA
6.53 6.53
5.11 5.11
RIAU RIAU
2.74 2.74 EAST EAST
KALIMANTAN KALIMANTAN
RIAU ISLANDS RIAU ISLANDS WEST
WEST WEST WEST
6.89 6.89
4.89 4.89 KALIMANTAN KALIMANTAN
SUMATRA SUMATRA
4.95 4.95
5.16 5.16
JAMBI
JAMBI CENTRAL CENTRAL
4.31 BABEL ISLANDS
4.31 BABEL ISLANDS KALIMANTAN KALIMANTAN
3.05 3.05 5.31
5.31
SOUTH SOUTH
SOUTH SUMATRA KALIMANTAN
SOUTH SUMATRA KALIMANTAN
BENGKULU BENGKULU
5.67 5.67 3.72
3.72
4.95 4.95
LAMPUNG
LAMPUNG
5.16
5.16
JAKARTA JAKARTA
6.07 6.07
Java (58%)
Java (58%)
5.82 5.82
WEST JAVA WEST JAVA
CENTRAL JAVA CENTRAL JAVA
BANTEN
BANTEN
5.14 5.14
5.72 5.66 5.66
5.72 BALI BALI
5.41 5.41 NTB
NTB
5.67 5.67 5.67 5.67 EAST JAVA
EAST JAVA
5.34 5.34
6.26 6.26
5.32 5.32
5.56 5.56
YOGYAKARTA YOGYAKARTA
6.01 6.01
GDRP ≥ GDRP 7.0% ≥ 7.0% 6.0% ≤ 6.0% GDRP ≤ < GDRP 7.0% < 7.0% 5.0% ≤ 5.0% GDRP ≤ < GDRP 6.0% < 6.0%
Source: BPS-Statistics Indonesia, calculated Notes: number (.) is share to national
Spatially, a number of regions have economic growth from the slowing down in
also recorded stronger growth (Graph manufacturing industry amids sluggish global
9). Economic growth on the island of Java demand. Similarly, Sumatra's economy is
is predicted to reach 5.6% in 2019 on the expected to expand by 4.6% with the support
back of solid household and government of exports, palm oil in particular, partly as an
consumption in line with the government's impact of B20 policy expansion to domestic
social assistance program (bansos) and village market. Economic growth in Kalimantan island
fund disbursements as well as spendings is also predicted to accelerate by 5.2% buoyed
on general election (Pemilu). Such solid by consumption, investment, and coal-related
consumption is therefore able to contained exports. Bali and Nusa Tenggara (Balinusra)
SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia
NATIONAL NATIONAL
5.18
5.18
5.17 5.17
5.07 5.07
5.05 5.05
5.02 5.02
NORTH
NORTH
SULAWESI
SULAWESI
5.20 5.20
GORONTALO GORONTALO
NORTH MALUKU
NORTH MALUKU
6.67 6.67
4.12 4.12
CENTRAL CENTRAL
WEST PAPUA WEST PAPUA
SULAWESI SULAWESI
6.07 6.07 2.96 2.96
WEST WEST
SULAWESI SULAWESI
SOUTHEAST SOUTHEAST
4.67 4.67
SULAWESI
SULAWESI
PAPUA PAPUA
6.18
6.18
-15.11 -15.11
MALUKU
MALUKU
SOUTH SOUTH 5.24
5.24
SULAWESI SULAWESI
7.21 7.21
Sulampua (9%) Sulampua (9%)
NTT NTT 6.80 6.80
Balinusra (3%)
Balinusra (3%)
3.87 3.87
5.28
5.03 5.28
5.03
4.68 4.68
4.36 4.36
2.26
2.26
1.56 1.56
1.23
1.23
0.66 0.66
(0.74) (0.74)
4.0% ≤ GDRP 4.0% < 5.0% ≤ GDRP 0% < 5.0% ≤ GDRP < 0% 4.0% ≤ GDRP GDRP < 4.0% < 0% GDRP < 0%
economy is projected to reach a 4.9% growth, outlook in 2020 remains promising, except for
driven by recovery in tourism sector as well Kalimantan. Region in Java, Sumatra, Balinusra,
as exports, copper in particular. Conversely, and Sulampua is expected to grow by 5.5-5.9%,
economic growth in Sulawesi, Maluku, and 4.5-4.9%, 5.6-6.0%, 6.5-6.9% respectively. In
Papua (Sulampua) is moderated to 2.7% contrast, economy of Kalimantan is projected to
impacted by contraction in copper export record a moderate growth of 4.0-4.4%, affected
in Sulawesi and slowing production activity by increased capital goods and construction
in nickel-related manufacturing industry in imports to support investment in mining
Sulawesi. Nevertheless, spatial economic industry as well as slowing coal export growth.
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Table 3. Indonesia's Balance of Payments (BoP)
2018* 2019**
Component (USD billion) 2017
I II III IV Total I II III
Current Account -16.2 -5.0 -7.8 -8.5 -9.2 -30.5 -6.7 -8.2 -7.7
A. Goods 18.8 2.3 -7.8 -8.5 -9.2 -30.5 1.2 0.5 1.3
- Export, fob 168.9 44.4 43.7 47.7 44.9 180.7 41.2 40.2 43.6
- Import, fob -150.1 -42.1 -43.5 -48.2 -47.5 -181.2 -40.0 -39.7 -42.4
a. Non Oil & Gas (Net) 26.2 4.7 3.1 3.1 0.3 11.2 3.4 3.5 3.4
b. Oil & Gas(Net) -7.3 -2.4 -2.8 -3.6 -2.9 -11.6 -2.2 -3.0 -2.2
B. Services, Primary Income, &
-35.0 -7.3 -8.1 -8.0 -6.6 -30.0 -7.9 -8.6 -8.9
Secondary Income
Capital and Financial
28.7 2.2 3.1 4.0 15.6 24.8 10.1 6.5 7.6
Account
1. Direct Investment 18.5 4.8 2.4 4.5 1.6 13.3 5.8 5.4 4.8
2. Portfolio Investment 21.1 -1.1 0.1 -0.1 10.5 9.3 5.2 4.6 4.8
3. Other Investment -10.7 -1.5 0.6 -0.5 3.6 2.2 -1.1 -3.5 -2.1
Overall Balance 11.6 -3.9 -4.3 -4.4 5.4 -7.1 2.4 -2.0 0.0
Memorandum:
- Reserve Assets Positions 130.2 126.0 119.8 114.8 120.7 120.7 124.5 123.8 124.3
(in Month of Import and
8.3 7.6 6.9 6.3 6.4 6.4 6.7 6.8 6.9
Official Debt Repayment)
- Current Account (% GDP) -1.60 -1.94 -2.96 -3.22 -3.58 -2.93 -2.51 -2.93 -2.66
Source: Bank Indonesia Notes: *Preliminary data, **Projected data
Indonesia's Balance of Payments (BOP) from a smaller current account deficit, which
demonstrated maintained external reduced to USD7.7 billion (2.7% of GDP) in
sector resilience despite global economic the third quarter of 2019 from USD8.2 billion
moderation. The BOP in the third quarter of (2.9% of GDP) in the second quarter of 2019.
2019 is roughly balance, improved significantly Meanwhile, the capital and financial account
from the deficit of USD2.0 billion in the surplus increased to USD7.6 billion in the third
previous period (Table 3). The gains stemmed quarter of 2019 from USD6.5 billion in the
SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia
Graph 10. Exchange Rate: Appreciation (+)
previous period. The position of international
/Depreciation (-)
reserve at the end of October 2019 stood at
THB 7.24
USD126.7 billion, up from USD120.7 billion at
PHP
3.59
IDR 2.44
the end of 2018, equivalent to 7.4 months of
JPY
1.63
imports or 7.1 months of imports and servicing SGD
0.06
MYR
-1.07
government external debt, which is well above
INR
-1.64
CNY
the international adequacy standard of three -2.28
EUR
-2.64
months. Moving forward, the current account
BRL
-3.44
KRW
-4.53
deficit is expected to decline to around 2.7% of
ZAR -4.73
GDP in 2019 and then remain manageable in
TRY -7.40
(%,ytd)
2020 in the range of 2.5-3.0% of GDP, while the -10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0
Source: Reuters, Bloomberg, data as 31st October 2019
capital and financial account surplus remains
large, thereby supporting external resilience. monetary policy response in advanced
Bank Indonesia will continue to strengthen countries. Seeking to reinforce exchange rate
policy synergy with the Government and policy effectiveness and strengthen domestic
other relevant authorities in order to increase financing, Bank Indonesia constantly strives
external resilience, including efforts to attract to accelerate financial market deepening,
foreign direct investment (FDI). targeting the money market and foreign
exchange market. Foreign exchange market
The rupiah has appreciated in line with development has contributed to increased
sound BOP performance. Since the beginning transaction volume on the forex market as well
of the year, the rupiah had gained 2.44% (ytd) as convergence of foreign Non-Deliverable
as of the end of October 2019 (Graph 10). Forward (NDF) exchange rate, spot transaction
The strong rupiah has been supported by exchange rate, and Domestic Non-Deliverable
maintained foreign capital inflows together Forward (DNDF) exchange rate (Graph 11).
with a well-functioning foreign exchange
supply and demand mechanism from the
Graph 11. Rupiah Exchange Rate: Convergence of Spot,
business sector. In addition, less global financial
DNDF, and NDF
market uncertainty translated into positive
(IDR/USD)
sentiment for the rupiah. Moving forward,
15100
Bank Indonesia expects rupiah exchange rate
14900
stability in line with the currency's fundamental
14700
value and maintained market mechanisms. This
14500
is supported by the prospect of maintained
14300
foreign capital inflows to Indonesia due to the
14100
sound domestic economic outlook coupled
13900
11 12 1 2 3 4 5 6 7 8 9 10 11
with attractive yields in portfolio investment
2018 2019
and the positive impact of the accommodative
BANK INDONESIA'S
ANNUAL MEETING
2019
Graph 13. National Inflation Realization and Target
Low and stable inflation remains under
(%, yoy)
control. Annually, headline inflation in 7
October 2019 was recorded at 3.13% (yoy), 6
unchanged from the level at the end of 2018.
5
All components of headline inflation were
4
low. Controlled core inflation was supported
3
3.6
3.4
3.1 3.1
3.0
by anchored inflation expectations as a result
2
of policy consistency by Bank Indonesia to
1
maintain price stability, managed aggregate
0
2015 2016 2017 2018 2019*
demand, stable exchange rate movement, and
Range Inflation Target Inflation Realization
limited impact of global prices. In addition,
Source: BPS-Statistics Indonesia & Bank Indonesia Notes: *Projected
volatile food experienced deflationary
pressures in line with price corrections affecting Financial system stability has been
various food commodities, while inflationary maintained despite the bank intermediation
pressures on administered prices remained low, function demand vigilance. A high Capital
both of which contributed to control inflation Adequacy Ratio (CAR) in the banking industry,
(Graph 12). Moving forward, Bank Indonesia recorded at 23.19% in September 2019, is
will consistently maintain price stability and indicative of maintained financial system
strengthen policy coordination with the central stability along with the low level of
and local governments to control inflation. nonperforming loans (NPL), namely 2.66% (gross)
For the year, Bank Indonesia projects inflation or 1.18% (net) (Graph 14). Moreover, public
at around 3.1% in 2019, representing the fifth listed corporations have maintained solid
consecutive year that the inflation target has performance in line with sound repayment
consistently been achieved, and in the 3.0±1% capacity, which has further supported
range in 2020 (Graph 13). financial system stability. Nevertheless,
Graph 12. Inflation: Core, Volatile Food, and Graph 14. Banking Industry Capital Adequacy Ratio
Administered Prices and Non Performing Loan
(%, yoy)
(%) (%)
16.00
25
5.0
14.00 25
4.5
24
12.00
23.2
24
10.00
4.0
23
8.00
23
4.82 3.5
6.00
22
3.0
4.00
3.2
22
2.7
2.00 21
2.5
1.58
21
0.00
2.0 20
-2.00
1 3 5 7 9 111 3 5 7 9 111 3 5 7 9 111 3 5 7 9 111 3 5 7 9 10
4 8 12 4 8 12 4 8 12 4 8 9
2015 2016 2017 2018 2019
2016 2017 2018 2019
NPL (Gross) CAR (rhs)
Core Volatile Food Administered Prices
Source: Financial Service Authority (OJK), calculated
Source: BPS-Statistics Indonesia
SYNERGY, TRANSFORMATION, AND INNOVATION
Toward an Advanced Indonesia
Graph 16. Currency in Circulation Growth
growth of outstanding loans disbursed
(%, yoy)
(IDR trillion)
by the banking industry moderated from
900 30
800
11.75% (yoy) in December 2018 to 7.89% 25
700
20
(yoy) in September 2019, primarily weighed
600
15
down by limited corporate demand for loans
500
10
400 4.49
(Graph 15). Conversely, the banking deposit
5
300
grew about 7.47% (yoy) in September 2019, 0
200
-5
100
slightly higher than the growth of 6.45%
0 -10
(yoy) in December 2018. Bank Indonesia
1 3 5 7 9 111 3 5 7 9 111 3 5 7 9 111 3 5 7 9 1113 5 7910
2015 2016 2017 2018 2019
believes the accommodative monetary and
Cash in Circulation Growth Cash in Circulation (rhs)
macroprudential policy mix together with
Source: Bank Indonesia
improved economic prospects along with
Goverment efforts to accelerate investment credit cards, and electronic money grew 32.1%
will effectively stimulate credit growth without (yoy) in October 2019, dominated by ATM/debit
disrupting financial system stability. Therefore, cards with a 94.5% share. Impressive growth
Bank Indonesia projects credit growth to reach of e-money transactions was maintained in
around 8% in 2019 and 10-12% in 2020, with October 2019 at 268.0% (yoy) in line with
deposit growth expected to reach around 8% in greater public uptake of digital currency and
2019 and 8-10% in 2020. broader e-money integration into the nascent
digital ecosystem (Graph 17). Moving forward,
The payment systems, bot