BI prepares five policy mixes to tackle 2023 global turmoil

BI prepares five policy mixes to tackle 2023 global turmoil

Screenshot—Governor of Bank Indonesia, Perry Warjiyo, at the 2022 Bank Indonesia Annual Meeting in Jakarta on Wednesday (November 30, 2022). (ANTARA/Astrid FaidlatulHabibah)

With the global turmoil continuing, we will continue to direct monetary policy toward stability. Pro stability.
Jakarta (ANTARA) - Bank Indonesia (BI) has prepared five policy mixes for next year in order to strengthen Indonesia's resilience, recovery, and revival amidst the expected global economic slowdown and recession risk in several countries.

"Please allow us to convey the direction of the BI policy mix for 2023. With the global turmoil continuing, we will continue to direct monetary policy toward stability. Pro stability," BI Governor Perry Warjiyo said at the 2022 Bank Indonesia Annual Meeting in Jakarta on Wednesday.

The five policy mixes include monetary, macroprudential, payment system, financial market deepening, and green and inclusive financial economy policies.

The monetary policies will focus on stabilizing the rupiah exchange rate and controlling inflation to return to the initial target as part of mitigating the spillover effects of global turmoil and supporting macroeconomic and financial system stability.

BI will continue its interest rate policy response in a well-calibrated, well-planned, and well-communicated manner to ensure that the core inflation target is achieved earlier, namely in the first half of 2023.

The magnitude and timing of the interest rate policy response will be based on developments in inflation expectations and core inflation compared to initial estimates and targets.

Second, the loose macroprudential policies will continue to encourage the provision of banking credit and financing to priority sectors and micro, small, and medium enterprises (MSMEs) in order to accelerate national economic recovery while maintaining financial system stability.

"This is also to develop green economic and financial inclusion," Warjiyo said.

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The payment system policies will encourage digitization based on the 2025 Indonesian Payment System Blueprint (BSPI), which envisages one language, one nation, and one archipelago.

BI will also accelerate digital economic and financial integration, cooperation in payment systems between countries, and the stages of developing the Digital Rupiah.

The money market deepening policies will be accelerated with the foreign exchange market, according to the 2025 Money Market Development Blueprint (BPPU), to strengthen operational effectiveness and policy transmission.

This will be done to create a modern and international standard money market and to develop financing instruments, including sustainable finance.

Finally, inclusive and green economic and financial policies will cover MSME development programs and the expansion of Islamic finance, including digitalization and expanding access to domestic and export markets.

Warjiyo said the five BI policy directions would be strengthened by close coordination with the central and regional governments as well as strategic partners through the Central and Regional Inflation Control Teams (TPIP and TPID).

"Also with the National Food Inflation Control Movement (GNPIP) in various regions to support inflation control," he added.

In addition, he said he will help ensure the strengthening of policy synergies between BI and the government's Fiscal and Financial System Stability Committee (KSSK) in order to maintain macroeconomic and financial system stability.

This synergy strengthening will be carried out at the same time to encourage credit or financing to the business world in priority sectors to support economic growth, exports, and economic and financial inclusion.

BI will also continue to strengthen international cooperation with central banks and other partner country authorities in the financial sector and support the implementation of investment and trade promotions in priority sectors in collaboration with relevant agencies.

"Close synergy with the government is also being pursued to succeed Indonesia's chairmanship of ASEAN 2023, especially on the financial integration path," he said.

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