Economy Under Control, Finance Minister Says

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  • TEMPO.CO, Jakarta - Finance Minister Bambang Brodjonegoro said that Indonesia's financial system and macroeconomy in the second quarter 2015 are stable amid external and domestic pressures. The minister came to his conclusion following a meeting with the Financial System Stability Coordination Forum (FKSSK) on Thursday, August 13.

    "Responding to the pressure on the exchange rate, stock market and government securities, the FKSSK has agreed to reinforce policy and duty coordination in order to stabilize the exchange rate, stock market and government securities (SBN) market," Bambang said in Jakarta on Thursday.

    According to Bambang, FKSSK's assessment shows that financial system stability is under control; as seen in survey indicators by Bank Indonesia (BI), the Financial Services Authority (OJK), the Indonesian Deposit Insurance Corporation (LPS), and the Finance Ministry. Nevertheless, the FKSSK remains alert, particularly related to the pressure on the money market and the exchange rate.

    The rupiah exchange rate, Bambang said, is currently undervalued, or not reflecting its fundamental value. The rupiah correction over the past two days was more caused by an external factor, which is the Chinese yuan depreciation against the US dollar.

    Meanwhile, pressure on the stock and government securities market is a combination of negative sentiments and low projections of issuers' performances.

    "To that end, the FKSSK has agreed to strengthen policy coordination in order to overcome problems in the financial markets and the weakening of the exchange rate," he said.

    To overcome temporary shocks against the rupiah, Bambang said that financial authorities will focus on exchange rate policies for now; making sure that the rupiah stays in accordance with its fundamentals.

    The central bank has been making interventions in the money market to stabilize the rupiah. Next, BI and the government will stay in the market to help maintain the stability of the SBN market.

    According to Bambang, the government and financial authorities will focus on two short-term policies: increasing investments and increasing the people's purchasing power; the latter to maintain the rate of domestic consumption.

    To boost investment, the FKSSK has issued policies as well as disbursed stimuli to accelerate corporate investments and improve the competitiveness of domestic products, including policies to accelerate infrastructure development.