Perry Warjiyo, the Governor of Bank Indonesia, took the stand during Leader’s Insight, a discussion that was broadcasted live on BI’s Instagram, Facebook and YouTube accounts. His segment focused on capacity-building and outreach for stakeholders in daerah (remote areas) and on how the G20 pertains to them.

“We’re on our way to recovery, but the journey ahead will not be easy,” Perry said.

He further listed the three issues that would be explored during the event: the outlook of the global economy and the obstacles that may arise, the G20 under Indonesia’s presidency and its role to encourage global recovery, and Indonesia’s responsibility to lead as an example and serve as an inspiration.

Highlighting the increase in Indonesia’s year-on-year economy, BI assures that the country’s economy will improve with economic growth estimated at between 4.7 and 5.5 percent in 2022, supported by increased exports and household spending. However, one problem that may arise is the unbalanced recovery of countries, especially with the tremendous growth of the United States and China, which cannot be compared to other developing countries.

Adding the importance of buying vaccines, increasing access to health care, stimulus spending and the unpaid debts of most African countries have to be taken into account when it comes to financial spending.

"Because the ability to recover from COVID-19 is not balanced. Developed countries can provide vaccinations quickly; developed countries can provide a bigger stimulus — fiscal stimulus, monetary stimulus. But in developing countries, the capability is limited,” Perry said.

He further explained that these three factors could become obstacles in the journey toward economic recovery, particularly in terms of the Recover Together, Recover Stronger theme was announced by Indonesia as host of the G20 this year.

The first is policy normalisation in advanced economies, as confirmed by the US Federal Reserve raising its target federal funds rate. Inflation in the United States, as we are expected to see, will cause ripples and affect interest rates on a global scale, which will then halt or slow the economic recovery rate of countries that are already falling behind. This is an example of how the unbalanced rate of recovery in different countries becomes a complication and that the countries with stronger economies will have to have a good plan and a clear communication system to avoid the problems that may arise abroad.

Secondly, Perry talked about the impact of the scarring effect on the economy, including the sectoral recovery and transformation efforts in the real sector to enhance competitiveness and increase productivity, as well as transition towards a green economy and sustainable finance.

The third escalating geopolitical tensions between Russia and Ukraine, which are influencing the global economic recovery regarding soaring international commodity prices, both energy and food, thereby intensifying inflationary pressures in a number of countries. Furthermore, there are disruptions in the global value chain that are impacting distribution activities and trade volume as well as global economic growth, while a sudden capital reversal to safe-haven assets poses a threat to external stability and exchange rate performance.

The second topic that was discussed at length was how to encourage global recovery under Indonesia’s presidency of the G20. Along with Finance Ministry Sri Mulyani, Perry outlined the six points of priority for the financial channel. The first is to find an exit strategy to support recovery and ways G20 countries can avoid the spillover caused by the exit policies of countries with a better economy, as explained by Perry in the previous session.

Perry also revealed that this has been brought up in meetings and has been well-received by other countries. He assured that the normalization strategy would follow principles that were well-calibrated, well-planned and well-communicated.

The next point is how to address the scarring effects to secure future growth, handle the impact of the crisis by increasing productivity, maintaining sustainable growth, as well as concentrating on employment, human resources, and the financial and corporate sectors in the country.

The third point is the transformation of payment systems in the digital era. Countries are expected to discuss the implementation of a cross-border payment system that has yet to be planned. Perry highlighted that Indonesia can be an example of the digitalization of payment systems, with some of the country’s unicorn companies operating as an example.

“The pandemic reminded us that if we build the economy, we must pay attention to the environment; green economy,” Perry said about the fourth point.

He explained that it was based on a green economy and sustainable finance, more specifically on risks brought on by global warming being tackled by going toward zero-carbon emissions.

The fifth point is then central to inclusivity in finance, mainly the benefit of open banking to push and support the productivity of the micro, small and medium enterprises (MSME), women and the younger generation in the financial field. Perry reinstated the belief that MSMEs are the backbone of the country’s economy and should be upheld as much as possible.

The final point is international taxation, which entails the need to discuss the implementation of a framework with the Organization for Economic Cooperation and Development (OECD) and other G20 member countries on Base Erosion and Profit Shifting (BEPS) as a result of multinational enterprises exploiting gaps because of the different tax laws among countries.

After Perry gave the audience insights into capacity-building on G20 issues, BI Deputy Governor Dody Budi Waluyo took over from Medan, North Sumatra, with a talk titled Exit Strategies and Scarring Effects Post COVID-19, while Deputy Governor Doni P. Joewono was in Makassar, South Sulawesi, talking about Indonesia’s Digital Economy System. Deputy Governor Juda Agung, meanwhile, was in Semarang, Central Java, to also address exit strategies and scarring effects. The hybrid event went live at around the same time in three different cities.

In Makassar, opening speaker was Head of BI Representative Office of South Sulawesi, Causa Iman Karana with the event feature five speakers: Dhia Anugrah Febriansa (Director of Commercial Telecommunication and Information Services BAKTI Kominfo RI), Ibrahim Kholilul Rohman (Senior Research Associate Indonesia Financial Group), Hendra David (CEO PT Hensel Davest Indonesia), Andi Nur Bau Massepe (FEB Unhas Lecturer / ISEI Makasar) and Feronika (Operasional Senior Manager Regional Enterprise Business & Government Business Service Divisi Telkom Regional VII). Deputy Governor Doni explained that the event in Makassar would center on the strategic plan for economic digitalization, one of the issues highlighted by Jokowi for G20. He revealed that the leaders would discuss in length about a cross-border payment system through a Central Bank Digital Currency (CBDC), at the G20 summit. He added that it was a particularly important issue for BI, as the system would have to follow mandates given from the central bank of each country.

Meanwhile in Medan, the event was attended by Agus Tripyono on behalf of North Sumatra Governor Edy Rahmayadi. A keynote speech was delivered by Dody of BI, and speakers included BI Institute Head Yoga Affandi, Hendri Saparini Economist and Founder of CORE Indonesia and the Indonesian Economist Association (ISEI) Medan Branch  Head Ramli. Dody reiterated the three issues that would be brought forth by President Jokowi in front of other leaders at the G20: the global health architecture, digital transformation and sustainable energy transition. He further highlighted that the issue of inflation that the country was facing right now was an important obstacle in relation to the economic recovery in North Sumatra.

Circling back to what was mentioned about normalization of countries by Perry, at the Semarang event, Juda warns about the risks of carrying out the policy normalization too quickly or too slowly. If it is carried out too quickly, it may damage the stability of the financial system. However, if it is done too slowly, it will distort the economy recovery. The other speakers were Chief Economist of Bank Permata Joshua Pardede, Anung Herlianto (Head of the OJK Banking Research and Regulation Department) and Harry Nuryanto (Chair of the Central Java Chamber of Commerce). Alongside Juda, the event was also attended by Peni Rahayu (Assistant for Economics and Development to the Regional Secretariate of Central Java), who delivered the opening speech.

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