Monetary Stance: November 2019
Bank Indonesia: Maintain rate at 5% in November
November Bank Indonesia BOG meeting
In-line with market expectation, Bank Indonesia (BI) Board of Governors (BOG) on its November meeting yesterday (21/11) decided to maintain reference rate BI7D-RRR at 5%, Deposit Facility at 4.25%, and Lending Facility at 5.75%. Nevertheless, BI supports its current accommodative monetary stance with cut of ending Reserve Requirements position (RR) by 50bp to 5.5% while average RR is maintained at 3%.
Credit growth estimated at 9% YoY in 2019
Following a decline in September credit growth to 7.9% YoY compared to August of 8.7% YoY, BI slightly lowered its target for this year to c.9% YoY from previously 10%-12% YoY. Meanwhile, Third Party Fund growth this year is also expected to grow by c.9% YoY (September : 7.9% YoY, August: 8.7% YoY).
GDP Growth 2019: estimated at 5.1% YoY
BI, as stated by the Governor Perry Warjiyo during November BOG meeting media release, targets Indonesia 2019 GDP growth of 5.1% YoY vs. close to 5.2% YoY previously (government outlook: 5.2% YoY). While Indonesia economic growth has been stagnating in the last quarters, we observe most of macro indicators have been stable and gradually improving.
GDP growth this year is expected to continue to be supported by stable and slightly improved consumer purchasing power as the major reflection of better indicators, we observe. Recent much- focused trade figures have been improving with the trade balance play its role on the overall better current account deficit to GDP ratio of 2.7% in 3Q19 vs. 2.99% in 2Q19.
Indonesia currency USDIDR 30 days to November 21st was at the average of IDR14,051 vs. ID14.153 for 30 days average to October 21st , an appreciation of 0.7%, and a 2.3% since early this year. So were inflation rates have been within central bank target range of 3.5% ± 1%.
Furthermore, Indonesia banking sector have been in a sound mode, with capital-adequacy ratio at 29.1% in September (August: 29.9%) and non-performing loans were 2.66 gross / 1.99% net. Both indicators are far better than required by regulator.
2020 with a better base for another hike
With improved necessary base, domestic economy is expected to post better growth next year.