Indonesia: BI targeting to reduce inflation to 3.61% in 2023

Our target is to control inflation immediately next year, so we really need an increase in the benchmark interest rate.

Jakarta (ANTARA) – Bank Indonesia (BI), in its Annual Budget Plan, has set the target of bringing down the Consumer Price Index (CPI) inflation to a level of 3.61 percent year on year (yoy) in 2023.

According to the central bank’s estimates, Indonesia’s CPI inflation reached 6.11 percent yoy as of November 3, 2022.

“Our target is to control inflation immediately next year, so we really need an increase in the benchmark interest rate,”  BI  Governor Perry Warjiyo said during a meeting with Commission XI of the House of Representatives, which was accessed from here on Monday.

Next year, the central bank will also continue to control the rupiah exchange rate to make it more stable and even strengthen it to a level of Rp15,070 per US dollar, he informed.

These targets indicate that economic growth is likely to be slower next year and will be capped at 4.37 percent yoy compared to the forecast of 5.12 percent for this year.

The forecast is in view of the global economic turmoil, which is expected to last until next year, however, the Indonesian economy is projected to fare better in 2024.

Speaking about the macro assumptions in Bank Indonesia’s 2023 Annual Budget Plan, Warjiyo said the central bank has set 40 key performance indicators (IKUs), which would be issued to the House of Representatives.

“Key Performance Indicators is the implementation of our 12 strategic programs,” he added.

According to the central bank governor, the indicators include the implementation of the main mandate and strategic initiatives as indicators of the success of the 2023 strategy, which is pro-stability and pro-growth, supported by institutional management based on 2EG, digital and green.

The indicators for next year include a core inflation target of 2–4 percent, adjustment of rupiah exchange rate volatility to economic developments and needs, as well as a foreign exchange reserve target equivalent to approximately 6 months of imports.

The indicators also include a bank credit growth target of 9.5–11.5 percent, the development of more than 3 thousand micro, small, and medium enterprises (MSMEs), 45 million Quick Response Code Indonesian Standard (QRIS) transactions, and approximately the same as 70 thousand QR transactions between countries.