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Bulletin of Monetary Economics and Banking

Document Type

Article

Abstract

Globally, the economy continues to recover. The economic growth in AS increases supported by solid consumption and increase on non-residential investment, as well as the economy of Tiongkok, supported by private investment and better export performance. European economy also better off with stronger consumption and export, and the reduction of geopolitical risk post the presidential election in France. The economy in Japan also increases supported by stronger domestic and export demand. This global trend supports the growth in Indonesia that rises to the level of 5,01% (yoy), with the pillars of exportperformance, better global demand and commodity prices, as well as higher government expenditure – particularly on investment – and the household consumption. Spatially, the national growth was mainly from Java and Kalimantan due to their better export performance. Inflation increases slightly particularly related to price regulation implemented in early 2017. Spatially, inflation occurs in most area except Sumatera who recorded deflation. The balance of payment recorded a surplus arisen from financial and capital surplus of 7.9 milliard dolar AS. However, the current account recorded deficit due to the deficit of oil trade balance and primary income. The reserve increases to 121.8 miliar dolar AS, accompanied with stronger Rupiah with lower volatility relative to peer countries. Following the monetary ease on previous Quarter IV, 2016, the monetary transmission is better yet not optimal due to the prudent practice of the bank on allocating credit. The interest rate decreases reflected on daily PUAB O/N reduction by 7 point to 4.23%. The deposit rate also decreases as well as the lending rate with larger decrease. Lookingforward, the growth in 2017 will be higher than 2016 on the range of 5.0 – 5.4%, while inflation will be around the target of 4 + 1%. We need to anticipate the impact of Fed Fund Rate increase, the lower of FED balance, and the trade and fiscal US policy, as well as the geopolitical dynamics across regions particularly in Korean Bay. Bank Indonesia will keep strengthening his policy mix and macroprudential, and his coordination with the government to ensure the inflation control, greater stimulus for growth, and the implementation of structural reform run on the right track, and hence preserve the sustainable economic development.

First Page

355

Last Page

384

Creative Commons License

Creative Commons Attribution-NonCommercial 4.0 International License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Country

Indonesia

Affiliation

Bank Indonesia

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