Indonesia Cuts Policy Rates and Reduces GDP Forecasts Amidst Low Inflation and Slower-Than-Anticipated Economic Growth

Bank Indonesia (BI) cut its benchmark seven-day reverse repurchase rate on the 18th of February 2021 by 25 basis points (bps) to 3.5%. BI’s Governor, Perry Warjiyo indicated that BI was lowering its economic growth forecasts for 2021 for Indonesia to a range of 4.3%-5.3%, from BI’s previous forecast of between 4.8%-5.8%.

Why it matters?

Indonesia’s first recession in over twenty years threatens to continue into 2021 following restrictions on movement imposed to stem the increase in COVID-19 cases, worrying policy makers.

According to media reports, the country’s latest economic indicators have reflected significant declines in imports, consumer confidence and retail sales. Inflation levels in 2021 have also remained we...