VOI - Voice of Indonesia | RRI - Radio Republik Indonesia

Head of Center for Economic and Policy Studies of Gadjah Mada University (UGM), Tony Prasetiantono viewed that Bank Indonesia -BI needs to raise its benchmark interest rate to face the rupiah depreciation against the current US dollar. In a discussion held in Jakarta recently, he said, BI should realize that the trend of low interest rate cannot continue because of spending foreign reserves owned by Indonesia.

“So, I think BI should quickly make interest rates up to 25 or 50 basis points. But the important thing is that BI should be aware that the era of low interest rates cannot continue. The US has raised interest rates, and other countries respond the same. Even, China is also small but there is already an increase in interest rates. Unfortunately, we spend too much foreign exchange,” Tony Prasetiantono said.

Although there is no guarantee that the rise of interest rate is able to strengthen the rupiah, Tony Prasetiantono said that the effort could reduce the burden on foreign exchange reserves. Currently, Indonesia's foreign reserves have dropped considerably despite being within safe limits. He further explained that the last condition of Indonesia's foreign exchange is at $124 billion dollars. This condition has decreased drastically, considering that in January 2018, Indonesia's foreign exchange reserves managed to reach the highest point at $132 billion dollars. (VOI/Rezha/RHM)

The weakening of the rupiah against the US dollar which has penetrated the level of Rp 14,000 per US dollar makes some people worried that the monetary crisis that occurred 20 years will reoccur. However, Head of Economics and Research Finance Corporate Services UOB Indonesia, Enrico Tanuwidjaja perceived that the public should not have to worry about it because Indonesia's economic condition is now more solid than 20 years ago. This was disclosed a discussion held by a private radio station in Jakarta recently.

“With the problem of resilience in terms of the economy, I think we are much more solid than 20 or 10 years ago. It proves that we are given a rating worthy of investment by three rating agencies. That is a real testimony. Secondly, our GDP growth is slowing down, but we must remember that our main engine that is commodity since the end of 2012 has actually gone down. So, the word term is quite normal to assume that our growth will slow down until later,” Enrico Tanuwidjaja said.

Enrico Tanuwidjaja further said that currently, Indonesia's investment spending is on the rise. So, the structure of the current economic condition of Indonesia is still quite good. Especially since 2013, Indonesia's foreign exchange reserve has continued to increase until reaching the highest point. In January 2018, the amount was $132 billion dollars. (VOI/Rezha/RHM)

The weakening of the rupiah against the US dollar which has penetrated the level of Rp 14,000 per US dollar raises concerns about rising inflation levels. However, Head of Center for Economics and Public Policy Studies Gadjah Mada University (UGM), Yogyakarta, Tony Prasetiantono said that there are other things that the government should focus on foreign debt and the ability of Indonesian imports, because until now, the level of inflation in Indonesia has still been under control or has not experienced a significant increase.

“Inflation still seems not too high. Therefore once again, if you count from mathematics from 13,500 to 14,000, it's still small. I just think that is not our concern, because beyond the factor of inflation, we must be concerned on payment of foreign debt, and then our ability to import becomes weak.” Tony Prasetiantono said in a discussion held by a private radio in Jakarta recently.

In response to the impact of rupiah weakening against the US dollar on the real sector, Tony Prasetiantono remarked that the sector is still running well and does not have a significant influence, because nowadays, the producers tend to spend their stock of goods by selling to consumers using the old price. In addition, the producers will not raise the price of goods in the near future to anticipate the fall in demand from consumers that will actually harm them. (VOI/Rezha/RHM)

The weakening of the rupiah against the US dollar which has penetrated the level of Rp 14,000 per US dollar poses some problems for the Indonesian economy. One of which is that foreign investors run away from Indonesia to the countries which are considered to have better condition than Indonesia. However, the runaway of the investors doesn’t need to be worried too much. Because, some other countries that become investors’ favorite destinations also experience similar conditions with Indonesia. This was disclosed by Head of Center for Economic and Public Policy Studies of Gadjah Mada University (UGM), Yogyakarta, Tony Prasetiantono in a discussion held by a private radio in Jakarta recently.

“Actually, the strengthening of US dollar is counterproductive. So, I'm sure it will be corrected. Then, the second conviction is that if the investors run away from Indonesia, yes they go. But after they run away, they don’t know the country where to go. They go to the USA or China. But finally, some of them are back to Indonesia. Believe me, it just takes time. Because the situation is currently unfavorable. The important thing is that they escape first from Indonesia. But after they know where to go, any investment options or country destinations also have the same problems. So in my opinion, Indonesia is still favorite as I said before,” said Tony Prasetiatono.

Tony Prasetiatono further said that Indonesia still remains a favorite country for foreign investors because it has pretty good fundamentals. These fundamentals include inflation, deficit of state budget, and economic growth. However, something to be watched out by the government is that there are fewer surpluses gained from the export activities of Indonesia and the Foreign Direct Investment (FDI) is dominated by hot money or short-term capital flows. Therefore, the government is asked to immediately intervene against the weakening of the rupiah. (VOI/Rezha/RHM)