Bank Indonesia Prepares for Global Economic Divergence as Trump’s Second Term Looms
JAKARTA, Investortrust.id – With U.S. President-elect Donald Trump set to begin his second term on January 20, 2025, Bank Indonesia Governor Perry Warjiyo has stressed the importance of proactive measures to counter widening global economic disparities and persistent financial market volatility.
Speaking during Bank Indonesia’s Board of Governors Meeting in Jakarta on Wednesday, Perry highlighted the robust growth trajectory of the U.S. economy, driven by fiscal stimulus, rising domestic demand, and advancements in technology investments enhancing productivity.
“In contrast, economic growth in Europe, China, and Japan remains subdued due to weak consumer confidence and lagging productivity, while India struggles with limitations in its manufacturing sector,” Perry noted.
The global economy is projected to grow by 3.2% in 2025, marking an upward revision from earlier estimates. However, Perry warned that U.S. government policies and Federal Reserve actions continue to heighten financial market uncertainties.
“The resilience of the U.S. economy, alongside protectionist tariff policies, has tempered expectations of substantial rate cuts by the Federal Reserve. Meanwhile, expansive fiscal measures are keeping U.S. Treasury yields elevated across both short- and long-term maturities,” he explained.
Adding to these complexities, escalating geopolitical tensions have prompted global investors to redirect capital into U.S. assets, strengthening the U.S. dollar and exerting additional pressure on currencies in emerging markets.
“These global dynamics demand robust policy responses to mitigate spillovers, preserve market stability, and sustain domestic economic growth,” Perry emphasized.
In response to the global divergence, Bank Indonesia has deployed pro-market monetary tools to stabilize the rupiah, ensure inflation remains within target, and attract foreign capital inflows.
“These measures also support the deepening of Indonesia’s money and foreign exchange markets, making them more attractive to global investors,” Perry said.
As of January 14, 2025, Bank Indonesia reported outstanding positions for its key instruments: Bank Indonesia Rupiah Securities (SRBI) at Rp 914.72 trillion, Foreign Exchange Securities (SVBI): at $1.96 billion, and Foreign Exchange Sukuk (SUVBI) at $436 million.
The issuance of SRBI has been instrumental in attracting foreign portfolio inflows and stabilizing the rupiah’s exchange rate. Foreign investors accounted for Rp 228.85 trillion, or 25.02%, of total SRBI holdings. Perry also noted that implementing a primary dealer system in May 2024 enhanced secondary market activities and repo transactions among market participants, further reinforcing the effectiveness of these instruments.
Looking ahead, Bank Indonesia plans to refine its monetary tools to better respond to global economic shifts and enhance the transmission of its policies.
“We remain committed to strengthening the attractiveness and volume of our monetary instruments, deepening financial markets, stabilizing the rupiah, and drawing in foreign capital inflows,” Perry concluded.
This proactive approach underscores Indonesia’s efforts to navigate potential headwinds and position itself as a stable and resilient economy amid an evolving global landscape.