Indonesia’s Easing Cycle to Last Long as Economic Growth Wobbles

(Bloomberg) --

Indonesia’s easing cycle is set to last long as policy makers in Southeast Asia’s biggest economy take steps to deal with a deteriorating global economic landscape, according to Bank Indonesia’s new Senior Deputy Governor Destry Damayanti.

Damayanti, who was sworn in by the country’s Supreme Court chief justice in Jakarta on Wednesday, said the economy is in need of stimulus amid easing by other central banks as headwinds from an escalating trade war between the U.S. and China persist. Bank Indonesia will use a mix of monetary and macroprudential policies to ensure financial stability, she said.

Damayanti, 55, is joining the central bank’s board as global markets face increased volatility and Indonesia’s economy continues to slow. The increase in trade tensions between the U.S. and China has already roiled stocks and bonds, with the dispute now also threatening to turn into a currency war. Bank Indonesia last month joined a global easing cycle, lowering its benchmark for the first time in two years in a bid to spur growth.

"It seems like the monetary policy easing will last quite long because we need stimulus for our future economic growth," Damayanti told reporters. Bank Indonesia would maintain an accommodative policy stance, she said.

Indonesia’s GDP Growth Shows Mixed Picture as Exports Slump

Damayanti was President Joko Widodo’s sole pick as senior deputy governor and becomes the first woman to hold the post since 2009. A former economist with PT Bank Mandiri, she had served as a commissioner at the Indonesia Deposit Insurance Corp., a government agency charged with promoting financial stability. She replaces Mirza Adityaswara, whose term expired last month.

Here are some key comments from Damayanti:

• Indonesia’s economy will continue to be weighed down by the trade war between the U.S. and China that exports cannot be relied upon as a source of growth
• Bank Indonesia’s policy mix will also be aimed at supporting domestic liquidity
• Central bank to remain in market to monitor developments and instability in financial sectors
• Domestic financial market is shallow and needs to be deepened to lessen impact of global volatility
• Shariah economy has huge potential but the challenge is to create more instruments and halal products to boost its contribution
• With U.S.-China trade war hurting Indonesian exports, government and Bank Indonesia to explore non-conventional markets and products diversification

To contact the reporters on this story: Viriya Singgih in Jakarta at vsinggih@bloomberg.net;Karlis Salna in Jakarta at ksalna@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Thomas Kutty Abraham, Karlis Salna

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