Indonesian banks stronger in facing global pressure: CIPS

04 January, 2019 | Source: Antara News

The Center for Indonesian Policy Studies (CIPS) has stated that Indonesian banks are now stronger in facing global pressure compared to the conditions in 1998.

"There are concerns that the 1998 economic crisis will reoccur as the Rupiah fell in value against the US dollar," Executive Director of The Center for Indonesian Policy Studies (CIPS) Rainer Heufers said here on Thursday.

In fact, he continued, the economic crisis in 1998 was very different from the 2018 economic situation.

The rate of currency depreciation in 1998 was far lower than in 2018.

"In 2018, banks in Indonesia are stronger, and Indonesia`s financial sector is much stronger in facing global pressure," he remarked.

In addition, he noted that the currency depreciation is far lower than it was in 1998.

Indonesian banks are stronger, and Indonesia`s financial sector is far less vulnerable to foreign risks.

In addition, the country`s foreign reserves vastly exceed those held in 1998, and the debt-to-GDP ratio is less than half of the 74 percent that the country experienced in 1998.

He also revealed that both budget deficit and general debt levels remain under control and well within legal limits.

This is happening even with Bank Indonesia (BI) following the normalizing policy of the US Federal Reserve and raising interest rates seven times by a total of 1.75 percentage points in 2018.

The BI Board of Governors earlier agreed on December 19 and 20, 2018, to hold the BI 7-Day Reverse Repo Rate at 6 percent, while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 5.25 percent and 6.75 percent, respectively.

BI believes that the policy rate is still consistent with efforts to reduce the current account deficit and maintain the attractiveness of domestic financial assets with due consideration to global interest rate trends in the next few months.

Furthermore, BI will also constantly strengthen coordination with the government and other relevant authorities to maintain economic stability and strengthen external resilience, which includes reducing the current account deficit to around 2.5 percent of GDP in 2019.

 

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