Economy: On 18 and 19 March 2020, the Board of Governors of Bank Indonesia (BI) agreed to lower the BI 7-day Reverse Repo Rate by 25 bps to 4,50%, Deposit Facility (DF) rates lowered 25 bps to 3,75% and Lending Facility (LF) rates lowered 25 bps to 5,25%. According to BI, monetary policy remains accommodative and is consistent with controlled inflation in the target corridor, while serving as a pre-emptive measure to maintain domestic economic growth momentum. In addition, following on from the policy stimuli announced at the previous Board of Governors monthly (RDG) meeting on 18-19 February and 2 March 2020, Bank Indonesia has reinforced its policy mix towards mitigating the risk of COVID-19 transmission, while maintaining money market and financial system stability and catalyzing economic growth momentum.
Some major monetary policy measures to be conducted by BI among others are strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability, encouraging the use of non-cash payment channels, strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market, expanding the incentive of a 50bps daily rupiah reserve requirement beyond banks that are engaged in export-import financing. BI will also be strengthening payment system policy to support COVID-19 mitigation efforts by providing hygienic currency fit for circulation, alternative cash and backup services, and urging the public to prioritize non-cash payment transactions
Trade: Indonesia will resume issuing import permits to Dutch companies for exporting onions. This decision was announced at talks these Dutch officials had with Indonesian authorities. These discussions were held during a recent trade mission. Last year, onion exports from the Netherlands to Indonesia declined significantly. The drop occurred after Indonesia deciding for temporary not to grant import licenses for onions. This ruling was taken in March 2018 as a result of a European Union decision regarding palm oil, which shocked the Dutch businesses.
Indonesia’s decision to open market access for the Dutch onion is part of the effort to resolve the shortage of onions in domestic market due caused by the disruption of import from China due to the Covid-19 pandemic. So far, China is the largest sources of onion for Indonesia and the country does not produce a lot of onions due to the unsuitable climate. The government has temporarily removed licensing requirements for imports of onions to increase supply and suppress the soaring prices. Importers would no longer need import permit letters (SPI) from the Trade Ministry and import recommendations for horticulture products (RIPH) from the Agriculture Ministry. The new policy will be effective from March 19 until May 31.
Finance: Banking industry starts to limit their operational services to cut the chain of Covid-19, in line with the encouragement of Financial Services Authority (OJK). By doing so, the bank customers can use online banking services as alternative as part of efforts to minimize the wider outbreak of Covid-19. In this regard, OJK asked all players in financial services industry to minimize inter-people interaction without disturbing the quality services. In this regard, OJK gives three regulations for the financial services operation.
First, regulation on the option of work from home is left to each self-regulatory organization in capital market and financial services institution. Second, increase the cleanness of work environment and services infrastructure like Automated Teller Machine, bank counter, and others. Third, delays all travel out of town and/or abroad especially the places that has been identified with Covid-19 outbreak in line with the latest updated information from the health ministry. Fourth, do not organizing activity that gathering a number of people both internally and/or externally in the form of socialization, meetings, or other events. The interaction should be done through utilizing information technology infrastructure.
Industry: The export of Indonesian cement has been decreasing in February 2020. It dropped sharply 27.9 percent to 442,000 tons compared with February 2019 of 610,000 tons. The Covid-19 outbreak in China has made the Indonesian cement producer to stop exporting to China. This situation hampers the expectation to increase export this year. The situation is worsened by the other exporting countries like Thailand and Viet Nam shifting exports to Bangladesh, Africa, Australia, and Philippines. Meanwhile, those countries are also the destinations for Indonesia’s export. This year, the export is targeted to reach 7.5 million tons, increase from 6.4 million tons last year.
According to data of the Indonesia Cement Association, domestic consumption decreased 0.1 percent to 4.87 million tons in February compared with the same month last year. The consumption increase happens in some regions especially North Sumatra, Kalimantan, Maluku, and Papua. All regions register the growth except Java and Nusa Tenggara. In total domestic and export sales this year reached 5.32 million, decreased 3.1 percent compared with February 2019. Over January-February, total sales reached 10.86 million tons, plunged 6.3 percent from the same period last year.