Indonesia spends 7.6 billion USD stabilising market amid COVID-19 outbreak

Jakarta (VNA) – Bank Indonesia (BI) has vowed to maintain the country’s financial market stability amid expectations that economic growth will slow due to the spread of the COVID-19 outbreak.

BI Governor Perry Warjiyo said that the bank had bought 130 trillion Rp (over 9 billion USD) worth of government bonds since the beginning of the year, of which around 110 trillion Rp (7.6 billion USD) was spent since the spread of the coronavirus in late January.

He was committed to stabilising the rupiah by selling dollars through cash or through domestic non-deliverables forwards.

The central bank recorded a foreign outflow of about 31.76 trillion Rp (2.19 billion USD) worth of government bonds and 4.87 trillion Rp worth of stocks so far this year as foreign investors flock to safe-haven assets such as the United States’ 10-year Treasury.

Due to the outbreak of the COVID-19, BI now expected the country’s economic growth to be lower than initial projection.

“We saw a V-shaped effect last month with a baseline rate of 5.1 percent of growth and could further reach 5.2 percent with fiscal stimulus but now we need to recalculate it,” Perry said, adding that the central bank would reassess its projection during this month’s policy meeting.

During the BI’s governor meeting in February, the central bank projected Indonesia’s economy to grow between 5 percent and 5.4 percent this year amid the virus risk.

However, Perry said recently he expected the gross domestic product (GDP) to expand by just 4.9 percent in the first quarter, slower than the three-year-low 4.97 percent recorded in 2019’s last quarter.

On March 2, BI also announced measures to stabilise the rupiah exchange rate, including by cutting banks’ dollar reserve ratio as from March 16 to free up billions of dollars to support the rupiah./.