Note : * calculated by HP Filter Method using annual Real GDP data in Billion Rp Source : IFS, CEIC, Bank Indonesia and staff estimates
69.22 4.64 19.30 70.50 2,745.83 6.3%
BB - 5.60%
10,852 Indicator
Bank Loan to Deposit Ratio (LDR) Non Performing Loan % Bank Capital Adequacy Ratio ICRG
Stock Market Index (last position) GDP Growth (yoy)
S & P Rating Inflation Output Gap*
1996 1997
109.26
11.82 70.00 637.43
7.8%
5.12%
149,293
Table A. 1 Key Indicators : Measuring Vulnerability of Economy to External Shocks √ 1997/98 and 2008/09 Recession
432.04 118.01 54.74 85.26 7.10 7.70 10.49 147.51 141.18 Ω 27.49 113.69 2.8 3.3 -5.5
- 27%
13%
20%
- - 2.4%
34.1%
32.7%
Ω 6.4%
26.3%
0.7%
0.8%
-1.3%
Indicator
GDP (Current)
Exports of Goods and Services Foreign Currency Reserves Imports of Goods and Services Average Monthly Imports Months of Imports Covered Balance on Current Account Total Government Debt Foreign Debt
Composition of External Liability Short term
Long term
Debt Service Payment (foreign) Primary Balance
Fiscal Deficit
1996 1997
US $ Billions % of GDP US $ Billions % of GDP
227.37 50.19 17.82 44.24 3.69 4.83 -7.80 Ω 110.17 Ω 22.03 88.14 2.82 4.55 1.73
Ω 22%
8%
19%
- - -3%
Ω 48%
Ω 9.7%
38.8%
1.24%
2.00%
0.76%
Table A. 2 Similarity and Difference between 1997/1998 Crisis and 2008 Global Crisis in Indonesia Similiarity
Both crisis were the consequence of the global economy, because of the economic and financial interdependence among countries;
The impact of the crisis led to falling value of the rupiah against foreign currencies;
The impact of the crisis will affect the economic sectors which resulted in losses for the community.
Difference
1998 crisis was multidimensional with economic crises, political, social, ideologi- cal, defense and security , meanwhile global crisis is tend to caused by financial and economic crisis;
1998 crisis started from currency crisis in the Bath-Thailand while the global crisis started from the breakdown of Sub-Prime Mortgage in the United States;
1998 economic crisis led to on society anarchism action while the global crisis did not;
1998 crisis led to the demanding for change of leadership, while global crisis did not;
The focus of monetary policy in 1998 crisis was tightening, meanwhile in global crisis was loosening.
Table A. 3
Monetary Policies Taken During Financial Crisis 2008 - 2009
Policies
Policy rate increased gradually to 9.25% on September 2008
Policy Rate (BI Rate) increased to 9.5%(October and November 2008, decrease to 9.25% (December 2008) and then decreased gradually to 6.75% in July 2009
Lowering Reserve Requirement for Rupiah currency from 9.1% to 7.5% consist of 5% primary reserve (cash reserve) and 2.5% secondary reserve (23 October 2008)
Lowering Reserve Requirement for foreign currency from 3% to 1%. (23 October 2008)
Objectives
To contain prevent inflationary pressure such as second round effect of the fuel price hike and food prices on other goods.
To sustain business momentum amid the global economic slowdown while safeguarding macro- economic stability
To provide more rupiah liquidity in to the banking system
To increase USD liquidity availability to be used by banks in their transactions with customers.
Conventional Monetary Policy
Policies Objectives
Unconventional Monetary Policy
Narrowing the interest rate corridor for Standing Deposit Facility (Fasbi) to BI Rate - 200 bps (from BI Rate - 300 bps and maintain Lending Facility (Repo) at BI Rate + 300 bps (4 September 2008)
Narrowing the interest rate corridor for Standing Deposit Facility (Fasbi) to BI Rate - 100 bps and Lending Facility (Repo) to BI Rate + 100 bps (16 September 2008) Expanding time period of Fine Tuning Operation from 14 days to 3 month (23 September 2008)
Amendment of Regulation regarding the Liquidity Facility for Commercial Banks (18 November 2008).
Open Standing Facility(repo) of 2-14 day tenure (9 December 2008)
Regulation regarding a Liquidity Facility for Rural Banks (BPR) (10 December 2008)
Narrowing the interest rate corridor for Standing Deposit Facility (Fasbi) to BI Rate - 50 bps and Lending Facility (Repo) to BI Rate + 50 bps (4 December 2008) Open 1 month window repo (FTE) (17 April 2009)
To reduce excessive volatility in the interbank money market
To reduce excessive pressure in the interbank money market and maintain sufficient liquidity in banking industry sufficiently.
To provide a wider flexibility for liquidity management in interbank money market
To smooth the operation of the payment system supported by high-value, liquid collateral
To provide wider access to banks by offering funding with a longer time horizon than the inter-day funding facility
To allow banks suffering from insufficient liquidity to remain solvent and avoid systemic impacts To facilitate the longer-term bank liquidity requirement To provide an equal opportunity for rural banks to make use of this funding facility if a short-term liquidity shortfall is experienced
To resolve the issue of segmentation in the interbank money market
To facilitate the longer-term bank liquidity requirement.
Table A. 4
Policies Taken to Address Confidence Issues and Asset Price Burst Joint Policies
Executing Gover nment Bond buyback and preparing a state-owned enterprise equity buyback program.
Allowing alternative security evaluation technique such as discounted cash flows beside marked to market value (Joint press release- Bank Indonesia, Bapepam,-LK and Accounting Association).
Allowing commercial bank to switch bond portfolio from trading and available for sale categories to held to maturity category.
Maintaining a sufficient level of foreign reserves.
Putting some restrictions on short-selling on the capital market. Limiting purchases of foreign currency without underlying transaction to US$100.000 to curb speculation.
Banning trading on banks» structured product/
derivative products that provide chances for bank customers to purchase foreign currencies including dual currency deposits that are callable forward.
Objective
To reduce the high risk perception in Indonesian financial portfolio which can distort the monetary policy transmission mechanism, The Minister of Finance has bought back IDR41 billion (US$3.89 million) worth of Government Bond using the government fund in the central bank account.
To provide market confidence for the government bond particularly when no market prices are available.
To minimize the impact of Indonesian Financial turbulence by providing an opportunity to the commercial bank to arrange portfolio categories.
To support the rupiah and focused more on preventing too volatile movement of the rupiah.
To reduce high risk perception
To reduce speculation and exchange rate volatility expectation.
Table A. 5 Foreign Exchange Policy Policies
Abolishing the limit of daily balance position of short term foreign loan (13 October 2008)
Foreign Exchange Provision for Domestic Corporation through Banks (15 October 2008)
The extension of FX Swap tenor from a maximum of 7 days to a maximum of 1 month (15 October 2008)
Regulation governing the purchase of Foreign Exchange by Banks (13 November 2008).
Amendment to Bank Indonesia Regulation on Concerning Derivative Transaction (prohibition of structured product transaction) (16 December 2008)
Coordination with Other Central Banks, such as : - Signing of a Bilateral Currency Swap
Arrangement (BCSA) between Bank Indonesia and People»s Bank of China (23rd March 2009) - Signing of the agreement on an increase in the
maximum amount of the Bilateral Swap Arrangements between Japan and Indonesia under the Chiang Mai Initiative (6 April 2009)
Objectives
To decrease pressures in USD purchase due to transfer of rupiah account to foreign currency account by foreign customers.
To enhance assurance in fulfilling foreign currency demand by domestic companies
To fulfill the temporary demand for USD currency and in order to provide sufficient adjustment time for banks/market players before actually adjusting their portfolio composition
To support the balance of supply and demand condition of foreign exchange in the domestic market
To moderate excessive pressure on rupiah exchange rate
To mitigate foreign currency purchase for speculative purposes
To support banks» prudential actions through Know Your Customer Principle (KYC).
To minimize speculative foreign currency transaction
To improve trade and direct investment between both countries
To assist in providing short-term liquidity for financial market stabilization and help Indonesia address tight international liquidity.