One of the factors driving global economic recovery is the revival in international trade, Bank Indonesia Governor Perry Warjiyo said here on Thursday while announcing the results of the July, 2021 board of governors meeting.
"Trade volume and world commodity prices are also estimated to be higher, thus supporting improved export performance in developing countries, including Indonesia," he noted.
He said BI's forecast is also supported by an increase in economic growth in the United States (US) and the European region, along with the acceleration of vaccinations and continued fiscal and monetary stimulus. Meanwhile, China's economic growth is also recorded to remain high, he added.
The economic outlook for India and the ASEAN region is likely to be lower due to the policy of restricting people's mobility to cope with the resurgence of COVID-19 cases, Warjiyo said.
However, uncertainty in the global financial markets is expected to increase, driven by market concerns about the surge in COVID-19 cases and its impact on the world economic outlook, as well as anticipation of plans to reduce monetary stimulus or tapering by the US Central Bank, the Fed, he added.
These conditions will push the diversion of capital flows to financial assets that are considered safe or flight to quality, resulting in limited capital flows and pressure on exchange rates in developing countries, including Indonesia, he projected.
The adjustment of capital outflows from developing countries also caused the rupiah exchange rate on July 21, 2021 to weaken by 0.29 percent point-to-point and 1.14 percent on average compared to at the end of June, 2021, he noted.
"With these developments, the rupiah as of July 21, 2021 was recorded to have depreciated around 3.39 percent compared to the figure at the end of 2020, relatively lower than the depreciation of currencies in a number of other developing countries, such as Philippines, Malaysia, and Thailand," Warjiyo said.
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