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Good time to invest in Indonesia: BI lauds country’s economic stability

Good time to invest in Indonesia: BI lauds country’s economic stability

Indonesia has proven its ability to maintain economic stability and resilience amid global uncertainties, a top central banker has said in front of an international forum in Bali on Wednesday.

“Bank Indonesia [BI] Governor Perry Warjiyo believes that now is a good time to invest in Indonesia,” the central bank wrote in a statement on Thursday. “Indonesia was able to become one of Asia’s best performers in maintaining economic stability throughout 2019.”

Perry voiced the sentiment at the Visionary Talk session of the BI’s Annual Investment Forum 2020, which was attended by 150 guests from other countries’ central banks, as well as government and banking industry officials.

Indonesia’s economy still managed to grow by 5.02 percent in the third quarter of 2019 despite recording the lowest level of expansion in more than two years. The International Monetary Fund estimated earlier this month that the global economic growth rate was 2.9 percent in 2019 while the so-called ASEAN-5 (Malaysia, Singapore, Thailand, the Philippines and Indonesia) grew 4.7 percent during the same period.

The government has been struggling to attract more investments into the country to help boost the economy. It is preparing omnibus bills that are expected to cut regulatory red tape deemed to hamper investment.

One of the keys to strengthening Indonesia’s economy is through an accommodative policy mix, Perry said, adding that his institution would continue to apply a similar policy mix this year to support the country’s economic growth.

The central bank lowered its benchmark interest rate, the seven-day reverse repo rate, four times last year by a total of 100 basis points, citing the need to boost domestic growth amid a stable external sector.

In addition to lowering its policy rates, BI also rolled out several macroprudential policies to boost growth in priority sectors, such as relaxing its loan-to-value (LTV) ratio for housing and vehicle loans by 5 to 10 percent and raising its macroprudential intermediation ratio (RIM) in March to 84 to 94 percent to jack up loan disbursement.

The average primary reserve requirement (GWM) has also been lowered by 100 basis points, with the latest 50 bps cut in November, which brought down the GWM for conventional and sharia banks to 5.5 percent and 4 percent, respectively, effective Jan. 2.

The central bank had also strengthened the country’s digital payment infrastructure by introducing the QR Indonesian Standard (QRIS) in August last year and implementing it in January.

BI this month decided to hold its policy rate steady, but hinted at a possible rate cut in the future.