Thursday 7 January 2016

AWAITING FOR GOVERNMENT ANTICIPATE ECONOMIC POLICY



There was no way to win back market trust amidst adverse economic condition but to run anticipative economic policy. It was right indeed for the Government to launch an integrated economy package in response to external and internal pressures.

As known, one of the indicators of weakening economy was depreciation of Rupiah against USD. Last week Rupiah was constantly weakening. At the spot market Rupiah even touched Rp.14,100 per USD, the lowest level over the past 5 years.

On June 17, 1998, Rupiah nose dived to the bottom level of Rp.16,650 per USD. According to the Coordinating Minister of Economy Darmin Nasution, pressure on Rupiah was due to domestic and regional and global sentiments.

To improve Rupiah position against USD he believed it was necessary to drum up foreign investor to Indonesia, especially in the form of foreign currency. Meanwhile the Minister o Finance Bambang S. Brodjonegoro stated that Rupiah was depreciated due to over expectation of Yuan devaluation. Hence depreciation was not related to domestic fundamental economy.

Business players complained that Rupiah weakening and policy adopted by the Government to solve it troubled them. They expected the Government would not worsen the difficulty by adopting policies disadvantageous to business. They found hard to sell their product as people’s purchasing power weakened.
           
Supposedly increase price of (imported) raw materials was compensated by product’s selling price, as people’s purchasing power weakened. So businesspeople expected Rupiah value could be stabilized so they could run better cost doing efficiency on the labor side, such as by outsourcing.

So far the Government, BI and OJK had separately issued policies, all intended to stabilize economy, including currency stabilization. Hence, market trust would be regained.

The role of BI now was to keep Rupiah position equal to that counterpart states so as not to let it slump too fast, or Rupiah must be synchronous with fundamental economy. Today Rupiah was being undervalued.

Government’s earnest attention to restore economy was evident when President Joko Widodo last week (27/8) met with BI Governor Agus Matowardojo and Minister of Finance Bambang Brodjosumantri to pinpoint the problem of national economy.

BI and Ministry of Finance had jointly made a statement that coordination between the Government and Bi was well underway. International coordination among FKSSK forum members had also been fostered and so was coordination between one body and another.

For example BI had been adopting prudent policies consistently the lead inflation close to target, i.e. 4% + 1 % and to keep deficit under control as well. Bi was also running macro prudential economy policy to make sure that macro economy was well guarded.

So it was right indeed for the Government to issue a new policy package, one of which was to increase forex reserve while trying to keep purchasing power high.

The policy package was frit of coordinated meeting between the Government and BI and OJK. The economy package was expected to be credible, timely, measurable, feasible and consistent.

As known the tax holiday issued by the Government was part of the master package prepared by the Government to strengthen Rupiah and national economy. Broadly speaking the policy package adapted was not just to jack up export and fiscal but uplift people’s purchasing power.

The latest policy package issued by the Government would naturally be responded positively by market players. It all would lead to strengthening of Rupiah and IHSG at BI which were sensitive to rumors and issues. (SS)

Business New - September 2, 2015

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