Our Economy is Not Affected Too Much by Global Situation: OJK Chairman
1 April 2023 12:07 WIB
TEMPO.CO, Jakarta - UNLIKE the other Association of Southeast Asian Nations (ASEAN) economies, the Indonesian economy was barely affected by the Covid-19 pandemic. In fact, when the outbreak subsided, several sectors came out even stronger than the pre-pandemic time. The Financial Services Authority (OJK) recorded quite favorable growths during the period January-February of 2023. Bank credit grew 10 to 12 percent, higher than the rate during the pandemic. Non-bank financing also grew by 14 percent.
The sector that contracted is the life insurance sector as insurance premium income fell. The trigger was none other than the failure of several insurance companies such as Jiwasraya and Asuransi Jiwa Bersama (AJB) Bumiputera to pay claims. “No country can advance if its insurance industry does not advance,” Chairman of OJK’s Board of Commissioners, Mahendra Siregar, said during an interview with Tempo journalists at his South Jakarta office on March 10.
Mahendra manages two offices: his office in Jalan Gatot Subroto and the OJK office in the Bank Indonesia Office Complex in Jalan M.H. Thamrin. The OJK has been vested with new authority and responsibilities through the Financial Sector Development and Strengthening (P2SK) Law passed by the government in December 2022. In an approximately one-hour-long interview, the former deputy finance minister explained the problems plaguing the insurance industry, the global recession, and the carbon market.
What are our current economic and financial conditions?
It was forecasted last year that this year would see a global recession. But early this year, some multilateral agencies and analysts estimated that the slowdown perhaps could be avoided and global recession might not happen at all. The latest forecasts again said that a slowdown would occur possibly followed by a mild recession. This recession is predicted to last until next year globally.
What are the indicators?
Efforts by developed countries such as the United States and European countries to tackle high inflation rates previously believed to be manageable by their central banks through increased interest rates to 5 to 5.25 percent proved insufficient and the rates are now moving towards 5.5 percent. Forecasts in recent days said they could go higher possibly to 5.75 percent. This interest rate policy will have an impact on their growth rates.
The function of their central banks is different from that of our central bank whose job also includes maintaining economic growth, not just stability and inflation. They only keep an eye on inflation. On the other hand, inflation in European countries is mostly caused by supply constraints and limited supplies. Is it due to the post-pandemic issues such as limited logistics, supplies, or high energy and food prices as a result of the war in Ukraine that has even widened as a result of the geopolitical rivalry between world powers?
What are the consequences for Indonesia whose growth is predicted to be around 5 percent?
It will remain the same. Because what we are doing is not just relying on the outside. Instead, we observe the developments out there, try to understand them well, identify, and map the risks and then take initiatives to minimize transmission risks and mitigate them through our preparedness. Based on the above, the performance last year, and the first two months of this year, I don’t see any reason to change that forecast.
Are you still optimistic with the 5.3 percent?
We agree on a minimum of 5 percent. Because of the criteria used in our plan or forecast and looking at the growths in the financial sector in general or in the financial industry, there shouldn’t be any problems to maintain 5 percent or higher.