Economic Crisis, Central Bank Cuts Reference Interest Rate by 25 Bps

Bank Indonesia (BI) has cut its benchmark interest rate by 25 basis points (bps) to 4.5%. This is the third such move in 2020 to mitigate the increasingly widespread impact of the coronavirus (Covid-19). The Deposit Facility rate was also cut by 25 bps to 3.75%, and the Lending Facility rate by 25 bps to 5.25%.

BI explained that the spread of Covid-19 is causing high uncertainty and weakening global financial market performance. Furthermore, the virus is suppressing many world currencies and triggering capital flight towards assets considered safe. The projected global economic growth for 2020 has been lowered to 2.5%, down from the previous projection of 3%.

Meanwhile, in Indonesia, BI has also lowered its domestic economic growth projection for 2020 to 4.2%-4.6% from the previous 5%-5.4%. BI is optimistic that after the spread of Covid-19, Indonesia's economic growth will rebound to 5.2%-5.6%. This is supported by improvements in the investment climate through the Job Creation Law and tax reforms.