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Jakarta Post

Rate cut to boost investment in second half, minister says

  • Marchio Irfan Gorbiano

    The Jakarta Post

Jakarta   /   Tue, July 23, 2019   /   01:30 pm
Rate cut to boost investment in second half, minister says Finance Minister Sri Mulyani Indrawati (AFP/Zach Gibson)

The recent rate cut by Bank Indonesia (BI), which has hinted at more cuts in the future, combined with improvements to government investment policies, is expected to boost investment growth, Finance Minister Sri Mulyani Indrawati has said.

“We hope investment will pick up in the second half of the year,” she in Jakarta on Monday, adding that the investment climate was expected to be supported by a declining interest rate, stable exchange rates, manageable inflation and strong momentum toward domestic growth.

The minister said the government’s policies on boosting investment included the issuance of fiscal incentives to attract investment, such as the recently issued tax deductions for research and development and skills training.

Investment, the second-largest contributor to gross domestic product, grew 5.03 percent year-on-year (yoy) in the first quarter this year, considerably lower than the 7.94 percent yoy growth recorded over the same period last year, according to Statistics Indonesia (BPS) data.

The central bank slashed its policy rate, the seven-day reverse repo rate, by 25 basis points to bring the rate down to 5.75 percent in the latest monthly policy meeting on July 18, the first since September 2017.

BI Governor Perry Warjiyo separately hinted that there might be more cuts in the future, considering the low inflation and the need to encourage domestic growth.

“Going forward, with low inflation and the need to boost economic growth, we are of the view that there is room for an accommodative monetary policy, whether through liquidity easing or through a rate cut policy,” he said. (bbn)