Indonesia's GDP recovery seen unaffected by capital outflows

March 26, 2021, 02.26 PM | Source: Reuters
Indonesia's GDP recovery seen unaffected by capital outflows

ILUSTRASI. Bank Indonesia (BI)'s formal economic outlook for 2021 is within a range of 4.3% to 5.3%.


ECONOMIC GROWTH - JAKARTA. Indonesia's economic recovery will not be disrupted by recent capital outflows and Southeast Asia's largest economy is set to grow close to 5% this year, a central bank deputy governor said on Friday.

Emerging markets have seen capital outflows in recent weeks pressuring their currencies, triggered by uneven economic recovery globally and rising U.S. bond yields, Dody Budi Waluyo said in a live broadcast from an investment forum in the holiday island of Bali.

Such outlows, which were not much in Indonesia's case, "will not ruin, will not change the (GDP) outlook for Indonesia", he said.

"Even I will say Indonesia's growth will be around 4.8%, or even higher, close to 5% in 2021," he added.

Bank Indonesia (BI)'s formal economic outlook for 2021 is within a range of 4.3% to 5.3%, compared with a contraction of 2.1% in 2020, which was Indonesia's first negative growth in more than 20 years.

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The rupiah has weakened more than 3% since the middle of February, while bond yields have risen due to capital outflows.

Dody reiterated that BI was committed to measures to stabilise the rupiah in the financial markets.

BI kept interest rates unchanged earlier this month and pledged to strengthen currency intervention amid global market uncertainty.

It has cut rates six times by a total of 150 basis points since last year to help the economy weather the coronavirus pandemic.

Dody repeated BI's commitment to keep its policy "accommodative" and said the pace of economic recovery also hinges on the success of the COVID-19 vaccines rollout, the timeliness of fiscal spending and credit growth.

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