Saturday, 18 January 2020 | 01:12 WIB

BI Rate Cutdown Expected to Attract Investments

Indonesia Finance Minister Sri Mulyani (bisnis)

JAKARTA, NETRALNEWS.COM - Indonesia Finance Minister Sri Mulyani Indrawati expects the lowering of Bank Indonesia (BI) benchmark interest rate by 0.25 basis points (bps) to 5.75 percent last week to spur the return of investments that had stalled in the first quarter of 2019.

She added, "Investments are rather weak compared to the end of 2018, which at that time, was approaching seven percent. With the reduction in interest rates and transmission, repairs and investment will occur," Finance Minister Sri Mulyani Indrawati said in Jakarta on Monday (7/22/2019).

When referring to the Investment Coordinating Board (BKPM) data, during the first quarter of 2019, total investments stood at only IDR 195.1 trillion, or growing 5.3 percent compared to the same period last year (YOY). However, the investment growth rate is lower compared to the first quarter of 2018 of 11.8 percent (YOY).

Sri Mulyani hopes the Central Bank will continue to provide a measurable response to the slowdown in global economic growth so that the impact does not whack economic activities in the country.

"We expect the response from BI to the global and domestic economic environment with the decline in interest rates, and the possibility that there will be further steps," she said.

Apart from the Central Bank, according to the former Managing Director of the World Bank, the government also continues to take various steps to encourage investment. This includes tax incentives to ease of investment permits through Online Single Submission (OSS). "The government is implementing policies that support investment and incentives that we provide, such as double deduction for research and innovation, vocational education. We also provide tax holidays and tax allowances, which are expected to gain momentum in the second semester. good," the Finance Minister added.

Head of the Ministry of Finance's Fiscal Policy Agency, Suahasil Nazara, hopes the Central Bank's lower interest rates can trigger investments into the country because the cost of borrowing (cost of borrowing) for the private sector and the government will decrease. He hopes investment can grow up to 5.2 percent this year. "And it will continue in the next year, investment can grow 5.3 percent," he said.

Meanwhile, Bank Indonesia Governor Perry Warjiyo hinted that BI could again reduce the 7-Day Reverse Repo Rate benchmark rate in the last five months in 2019. This could happen as long as inflation was kept under control, and stability was maintained so that there was an opportunity to take advantage of momentum economic growth.

"For the easing of monetary policy remains open, both from the policy of liquidity as well as further decline in the benchmark interest rate," Perry said in front of members of the DPR Budget Board in the 2019 Semester I and Prognosis Report Meeting in Jakarta on Monday.