Indonesia’s Central Bank Signals More Easing as Growth Sputters

(Bloomberg) --

Bank Indonesia will retain its “accommodative” monetary policy stance to bolster Southeast Asia’s biggest economy against a global slowdown.

The central bank will continue to deploy its mix of policy tools in 2020, which helped support the economy this year, Governor Perry Warjiyo told the annual bankers meeting in Jakarta on Thursday.

Bank Indonesia last week lowered the reserve ratio for banks by 50 basis points while leaving the benchmark interest rate unchanged following 100 basis points of reductions since July. With the U.S.-China trade war hurting demand for commodities, the government has offered tax breaks to companies and property buyers to prop up growth.

“The mixed policies have resulted in low inflation, a stable exchange rate and a stable financial system. We have been using all instruments to push for growth momentum,” Warjiyo said. “We will continue these mixed policies in 2020.”

The rupiah, which has gained more than 2% against the dollar this year, was down 0.1% at 14,099 as of 9:32 a.m. in Jakarta on Friday.

While acknowledging the combined efforts of the government and other institutions, Warjiyo reiterated that the central bank could not be “the only game in town” in stimulating growth.

“Monetary policies are not effective if they rely on their own,” he said. “Rate cuts and liquidity injection have not been able to save the world.”

After raising rates last year to curb a currency rout, Bank Indonesia has switched its focus to supporting growth amid a global slowdown. The central bank expects Indonesia’s economy to rebound toward 5.3% next year from a forecast of 5.1% this year.

Indonesia Aims to Plug Deficit by Shunning Raw Material Exports

Other highlights of Warjiyo’s address to bankers:

• Indonesia needs to simplify investment procedures to attract foreign investment, especially foreign direct investment
• Economy needs to be integrated faster with rising trend of digitalization
• Indonesia needs to upgrade labor skills and revise business models to adjust to changing behavior, especially among millennials
• It is time for banks to increase lending and for companies to push for higher production and investment
• Bank Indonesia will expand macroprudential policies in 2020, especially for small and medium enterprises and priority sectors

--With assistance from Ruth Carson.

To contact the reporter on this story: Arys Aditya in Jakarta at aaditya5@bloomberg.net

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

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