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Jakarta Post

Bank Indonesia on guard amid risk of capital outflow

  • News Desk

    The Jakarta Post

Jakarta   /   Mon, July 9, 2018   /   05:00 pm
Bank Indonesia on guard amid risk of capital outflow Bank Indonesia Governor Perry Warjiyo (thejakartapost.com/Anton Hermansyah)

Bank Indonesia Governor Perry Warjiyo says the central bank is on guard for possible economic impacts on Indonesia as the trade war between the United States and China heats up.

Last week saw the two global economic powerhouses slap higher tariffs on products shipped between them.

The US applied new tariffs to imported products from China with an estimated value of US$23 billion. China retaliated by enforcing tariffs on 545 imported products from the US worth $34 billion.

Perry said on Monday that one of the results of the trade war was an increase in the US Federal Reserve’s Federal Funds Rate, which would cause capital inflows to the US and capital outflows from developing countries, including Indonesia.

Bank Indonesia has been intensively monitoring the impacts of the trade war on the domestic economy to assure that the central bank, in cooperation with the government and the Financial Services Authority (OJK), formulate a policy to anticipate the impact.

The move by Bank Indonesia to increase its BI reference rate three times [in recent weeks] by a total of 100 basis points was part of the efforts to react to external economic uncertainty, he said, adding that the other way to counter the negative impacts of the trade war was to reduce the current account deficit.

“We have to find a breakthrough to encourage tourism and strengthen the competitiveness of Indonesian export products,” Perry added, as quoted by kompas.com.

He said strengthening the domestic market was also important, particularly in view of protectionist policies implemented in traditional destination countries for Indonesian export products. (bbn)