Financial markets Impacted by Covid-19, BI Cuts The Rate

JAKARTA. The Central Bank of Indonesia (Bank Indonesia/BI) lowered the benchmark interest rate or BI 7-Day Repo rate (BI7DRR) again by 25 basis points (bps) to 4.50%. This decision was taken after BI held a Board of Governors' Meeting (Rapat Dewan Gubernur/RDG) on 18-19 March 2020.

This step is the response that monetary Authority provides to the latest economic developments. One of them is the impact of spreading of Corona Virus Disease 2019 (Covid-19) which has been established by WHO as a pandemic.

The spread of Covid-19 in many countries has caused global uncertainty, suppressing many world currencies, and triggering a reversal of capital to financial assets that are considered safe. Thus, world economic growth is expected to decline.

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BI estimates that global economic growth will drop to 2.5%, lower than the 2019% economic growth of 2.9%. In fact, BI previously predicted global economic growth could be better than the year 2019, which was 3.0%.

Meanwhile, Indonesia's economic growth is expected to be lower than the initial projection, to 4.2%-4.6%. Formerly, BI projected that Indonesia will grow at a level of 5.0%-5.4%. 

Nevertheless, BI predicts that after the end of Covid-19, Indonesian economy in 2021 will re-grow to the level of 5.2%-5.6%, on condition that the government is able to improve the investment climate. (ASP/Ken)