JakartaHerald.com - President Joko Widodo, also known as Jokowi, expressed his concerns about the tightening circulation of money, despite Indonesia's economic growth still hovering around 5%.
This was conveyed towards the end of his term. Jokowi identified the issue arising from the excessive issuance of instruments by the Ministry of Finance and Bank Indonesia (BI), namely Government Bonds (SBN), Indonesian Rupiah Securities (SRBI), and Foreign Exchange Securities (SVBI).
"Let us not all rush to buy the instruments I mentioned earlier to BI or SBN, although it is allowed, but in order for the real sector to appear better than the previous year," stated Jokowi at the Annual Meeting of Bank Indonesia (PTBI) at the BI Headquarters in Jakarta, quoted on Monday (12/2/2024).
It should be noted that BI data revealed that the M2 position in December 2023 amounted to Rp 8,824.7 trillion, with a growth of 3.5% year-on-year (yoy).
This growth figure significantly differed from the September conditions that were still at 6% yoy.
One of the reasons for this situation is attributed to the growth of third party funds (DPK). By December 2023, DPK only increased by 3.8% yoy to reach Rp 8,234.2 trillion, while loans surged by 10.38% yoy to Rp 7,044.8 trillion.
The growth of DPK was actually higher compared to November 2023 (3.04%) and October 2023 (3.43%). However, when viewed from the December year-end position, this growth was the lowest since 1999 or in the past 24 years.
Meanwhile, Bank Indonesia reported that the liquidity condition of the banking system strengthened at the beginning of the year. The growth of DPK rose to 5.98% annually (yoy) as of January 2024.
According to BI records, the Liquidity Adequacy Ratio to DPK (AL/DPK) rose to 27.78% as of January 2024.
Furthermore, the achievements at the start of this year saw a significant increase compared to December 2023, where DPK only grew by 3.8% yoy.
BI Governor Perry Warjiyo mentioned that this would serve as a strong foundation to achieve the targeted credit growth of 10%-12% annually this year. "The basis of his belief [in credit growth] is that demand will rise, hence growth will follow," he said, quoted on Monday (18/3/2024).
Additionally, BI revealed that several banking industry players were starting to transfer their funds from various financial instruments such as bonds to credit distribution.
"The strategy of banks to channel credit to meet their funds besides DPK is to transfer funds currently placed in bonds to credit distribution," explained Perry.
On a separate note, Chairman of the Financial Services Authority (OJK) Board of Commissioners, Mahendra Siregar, stated that the financial services sector also needs to consider the geopolitical and global economic conditions.
"In the United States, inflation remains sticky amidst a solid economic growth, prompting an increase in the no landing estimate," he said during a press conference at the OJK Board of Commissioners Meeting in February 2024, quoted on Monday (18/3/2024).
Additionally, in Europe, the economies of Germany and the UK are experiencing a contraction and entering recession with a decline in inflation rates. Meanwhile, in China, the economy is below historical averages with increasing pressures in the financial markets being observed.
From a geopolitical perspective, the heightened escalation in several regions poses risks of instability that could lead to future increases in commodity prices.
Domestically, according to Mahendra, the economy appears solid, reflected in the year-on-year growth of 5.04% in the fourth quarter of 2023. This was primarily driven by the consumption of non-profit institutions serving households and government investment related to the Nusantara Capital City project.
The above discussion reflects the current economic trends both domestically and globally, highlighting the challenges and opportunities faced by Indonesia's financial sector under the leadership of President Jokowi and the policies implemented by various financial institutions.
The need for a balanced approach to monetary policy and financial stability remains crucial in navigating the complexities of the ever-evolving economic landscape.
Source: CNBC
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