21 Feb 2024 | News & Feature

BI Policy: Calm waters, but beware the monster underneath

  • Bank Indonesia (BI) maintains its benchmark rate at 6.00% to uphold stability amidst a relatively stable macro environment, marked by a rebound in IDR/USD and increased capital inflows post-election.
  • Concerns arise over the growing disparity between loan and deposit growth, signaling a deepening liquidity shortage that may hinder sustained economic growth.
  • Government spending injections in late 2023 have aided liquidity, but recent cash-focused spending may drain liquidity from the banking system, but could boost consumption and GDP growth.
  • Balancing growth objectives with maintaining financial stability poses a significant challenge for policymakers in 2024, as Indonesia aims for 5% growth amidst growing symptoms of liquidity shortage, potentially leading to short-term inflation and medium-term CA deficits.