Economy: Central Bureau of Statistics (BPS) recorded Indonesia’s inflation rate at 0.10 percent in March 2020 (month-on-month). The annual inflation was 2.96 percent, which below 3 percent of the 2020 , meaning that the general price level is still manageable. Inflation occurred due to price hikes, including the prices of food, beverage, and tobacco that increased 0.10 percent; cost of clothing and footwear surged 0.12 percent; housing, water, electricity, and household fuels 0.02 percent; and household appliances, equipment, and routine maintenance 0.28 percent. Deflation was recorded in transportation services by 0.43 percent; and information, communication, and financial services 0.09 percent. Inflation in education remained unchanged.

The low inflation also reflects a slowdown in economic activity due to stricter measures to limiting the spread of the Covid-19 . The measures have been causing many economic sectors suffering sharp decline in sales and depleting cashflows, lead to the risk of massive business collapses. Service sectors of hospitality, transportation, and entertainment have been crying for help from the government. The pandemic forces customers to stay home and reduce spending.

Fiscal: The Indonesian government launched a regulation in-lieu-of-law to manage a wider fiscal deficit and increase spending in response to Covid-19, a move that will effectively revise the state finances law. The 2003 state finances law caps the budget deficit at a maximum of 3 percent of gross domestic product for a fiscal year. The new rule allows the government to exceed that limit for three consecutive fiscal years, but the cap will be reinstated in 2023. Relaxing the budget deficit limit would accommodate the government spending in tackling the pandemic and its economic impact.

On 31 March, President Joko Widodo issued Government Regulation in lieu of Law on State Finance Policy and Financial System Stability. The regulation aims to serve as a foundation for the Government, banking authorities, and financial authorities to take extraordinary measures to ensure the people’s health, safeguard national economy, and maintain financial system stability. In addition, the government also allocated up to Rp4015.1 for the handling of the ongoing covid-19 outbreak. It includes Rp75 trillion for healthcare spending, Rp110 trillion for social protection, Rp70.1 trillion for tax incentives and credit for enterprises, and Rp150 trillion for economic recovery programs, including credit restructuring and financing for small and medium businesses.

Finance: The governor of Bank Indonesia asked for businesses to meet their US dollar needs via forward transactions, including in the domestic non-deliverable forward market (NDF), instead of only doing the transaction in spot market. “We hope that importers and other parties that need dollars to meet their needs not only in the spot market, but also entering forward market through domestic NDF,” said the governor in an online news conference. He added that “The premium is relatively cheap, and it can hedge your exchange rate.” Bank Indonesia launched the NDF in September 2018 as a hedging instrument to improve the stability of the Rupiah exchange rate, as well as improve the implementation of hedging transactions for market participants. The regulation allows commercial banks to conduct domestic non-deliverable forward transactions.

According to Investopedia, non-deliverable forward (NDF) is a cash-settled, and usually short-term, forward contract. The notional amount is never exchanged, hence the name “non-deliverable.” Two parties agree to take opposite sides of a transaction for a set amount of money – at a contracted rate, in the case of a currency NDF. This means that counterparties settle the difference between contracted NDF price and the prevailing spot price. The profit or loss is calculated on the notional amount of the agreement by taking the difference between the agreed-upon rate and the spot rate at the time of settlement.

Business: The Indonesian retail sector particular those providing basic needs and health products in supermarkets, has been positively affected by the Covid-19 pandemic that has been spreading in the country. The high demand during the pandemic boosts the turnover of retailers. The Indonesian Retail Entrepreneurs Association (Aprindo) admitted there was a surge in sales of retail businesses recently. The surge was due to the people’s behavior who prepare their stock of food amid the fears of shortage supply during regional quarantine along with the pandemic.

Another factor behind the increase in retail sales is the people preparation for Muslim fasting month starting in end of April. Such an increase is always happening every year, of which there is about 10-15% increase in turnover ahead of the moment of Ramadan. If coupled with the current condition of the pandemic, the sales growth is getting higher. Still, the situation creates uncertainty for retailers because it is difficult to predict how long the pandemic will be last. The prediction is required for the retailers to calculate the credible stock of goods in anticipate the demand for the whole year of 2020.

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