ASEAN KEY DESTINATIONS
Indonesia sees US$3.5b in inflow
Bank Indonesia (BI) has recorded Rp 46 trillion (US$3.5 billion) of foreign capital flowing into the country on a year-to-date basis, an increase of by Rp 2 trillion from the same period last year.
BI Governor Agus Martowardojo said the increase in foreign capital inflow showed that foreign investors were still optimistic about Indonesia's economy. The central bank has projected economic growth for 2016 at 5.2 to 5.6 percent.
"It indicates foreign optimism over Indonesia's economy. The adjusted BI rate will surely create more optimism in Indonesia," he said in Jakarta on Friday.
The central bank cut its benchmark interest rate by 25 basis points (bps) to 6.75 percent. This was the third time the bank slashed its interest rate by 25 bps over three consecutive months.
According to Agus, there was a potential for domestic economic growth to improve further in the first quarter of 2016, by 5.1 percent, in the wake of fiscal stimuli acceleration.
However, global growth in 2016 and 2017 is expected to be lower than previously expected due to slow recovery in advanced countries and a slowdown in developing countries. Oil prices are predicted to remain low due to abundant supply and dwindling demand.
Under such conditions, the Federal Reserve has kept the Fed fund rate at 0.25 to 0.50 percent. "A rate hike is not expected until the second half of the year, with less magnitude than previously predicted," said BI director executive for communication Tirta Segara.
Capital inflow and a decrease in demand for foreign exchange in the domestic market have resulted in the rupiah appreciating, he continued. In February, the currency rose 3.09 percent year-to-date to a level of Rp 13,372 per US dollar.
"The rupiah has appreciated on investors’ positive perception concerning the promising economic outlook after the BI rate was slashed," Tirta said, adding that the government introduced policy packages aimed at improving the investment climate and infrastructure projects.
Meanwhile, a decrease in foreign exchange transactions from an average of $7.3 billion to less than $3 billion due to a central bank regulation concerning the mandatory use of the rupiah has also supported the rupiah’s appreciation.
Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below