Bank Indonesia had just held their high-level event (HLE) culmination known as the Annual Meeting of BI on Wednesday (11/30). As uncertainty circulating the global economy rises, the Indonesian central bank discusses the current and future national economy–monetary policy against potential upheaval. Doubts have emerged as stakeholders are given the recent views on the national economic conditions and the challenges it might face. The Governor of BI, Perry Warjiyo, claims that the central bank’s policy will continue to strengthen Indonesia’s economic resilience and revival amidst global conditions. Additionally, these measures are sought to create a pro-stability policy. Governor Perry Warjiyo stated that the assistance and synergy between the Central Bank and the Government would be crucial to realize the optimistic visualizations. One of the major topics during the conference included four BI policies: macroprudential policy, inclusive and green financial economy policy, payment system policy, and financial market policy. Along with efforts to accelerate economic recovery, the Central Bank also projected a 10% – 12% growth of credit in 2023 and 2024. Following this, the secretariat of the Financial System Stability Committee will focus on stimulating credit growth and sustaining financial stability. Moreover, the Government has shown apparent interest in digital payment systems. Digitalization of payment systems immediately became a matter of attention during the conference as an attempt to quicken economic integration and digitize the financial system. All things considered, the outcomes of the Bank Indonesia meeting are expected to positively adjust the national economy upwards.
As the digitalization era has swept its way to Indonesia, the Central Bank has decided to concur with the situation by shifting its attention to developing the Digital Rupiah or Central Bank Digital Currency (CBDC). Hence, initiated by Bank Indonesia’s move to publish a white paper regarding this endeavor. The declaration marks the commencement of the Garuda Project, an agenda to navigate the system’s architecture and comprehensive design of the digital currency. Key drivers to the advancement of this plan include affirming BI’s function as the sole authority in issuing currencies (sovereignty of digital Rupiah), escalating BI’s role in the international scope, and accelerating the unification of the Digital financial economy nationwide. The implementation of the Digital Rupiah would be set up gradually, starting with the wholesale of CBDC for issuance, eradication, and interbank transfer. Followed by the promotion of the Digital Rupiah through monetary operations and money markets business model. Finally, integrating wholesale Digital Rupiah with an end-to-end method of retail Digital Rupiah. In order to create better outcomes, collaborations nationally and across countries are needed. Essentially, obtaining an integrated economy and opening up opportunities for financial inclusion is expected to be the end result of this big operation. According to the governor, Bank Indonesia will facilitate the deepening of the money market under its 2025 blueprint for the unification of efficient modern financial and money market operations. On the downside, the enhancement of the Digital Rupiah will be futile unless all stakeholders, including cooperation with other central banks and International institutions, are carried out.
According to recent reports, the world has predicted an upcoming recession which Bank Indonesia's governor is confident the national economy will withstand. While other countries may face issues, Indonesia's economy is expected to grow approximately 4.5% – 5.3% in 2023 and 4.7% – 5.5% in the following year. A few factors that could support the claim are strong export, house consumption, and increased investment performance. Despite that, risks are still in sight, one being Europe's and the United State's slowing economy that might affect other correlating countries. In addition, the staggering inflation triggered by high energy and food prices, prolonged high-interest rates, and the rapid flow of foreign capital from developing countries could raise concerns in the financial market. Simultaneously, solutions emerged as the Central Bank launched five mitigation measures to prepare for the turmoil. First, a monetary policy that would stabilize the rupiah's exchange rate and inflation. Second, continuing to loosen macroprudential policy would help stimulate bank lending and payments in priority sectors. At the same time, maintaining financial system stability along with recovering the national economy. Third, establishing the Digital Rupiah based on the Indonesia Payment System Blueprint 2025 by actualizing one language, one nation, and one native land. Following this, accelerate the money market policy using the foreign exchange market in accordance with the Money Market Development Blueprint 2025. This action was agreed upon to help increase operational activity and policy transmission. Alternatively, it is seen as a way to create a modern money market and international standards. Lastly, an economic policy inducing inclusive and green finance through MSME development programs. Such effort is paired with the expansion of islamic finance by digitizing and extending domestic and export market access. Nevertheless, the definite effect of the Bank Indonesia’s policy is yet to be seen.
Sources:
CNBC Indonesia
Kompas.com
Warta Ekonomi
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