Jakarta 1 November 2023 – The global economic condition, which has not yet recovered after the COVID-19 pandemic, continues to experience challenges in the form of the Russia-Ukraine war and the Hamas-Israel conflict which have triggered increases in energy and food.

“Energy and food prices, which since 2022 have triggered hyperinflation, high-interest rates, and hindered post-pandemic economic recovery, are now slowly starting to rise again,” said President Director of PT Investortrust Indonesia Sejahtera (IIS) Primus Dorimulu, during the event The Best Investortrust Companies 2023, which held at the Artotel Suites Mangkuluhur Hotel, Jakarta, Tuesday (31/10/2023).

Primus said, due to uncertain geopolitical conditions, global economic growth in 2023, which was previously predicted to grow at 3%, has now been revised to 2.9%, and in 2024 it is estimated that it will only grow at 2.8%.

Apart from geopolitical factors, the Indonesian economy is also influenced by the economic policies of the United States (US). The decisions of the Federal Open Market Committee (FOMC) Meeting which will be held tomorrow, November 1 2023 will attract world attention.

“Will the FOMC raise the fed funds rate (FFR) again, which is currently at 5.25%-5.50% and has been raised 11 times since 2022?” he said.

Primus said that the policies of the Federal Reserve (The Fed) had claimed victims in many countries, especially emerging markets like Indonesia. As a result of interest rates which have risen to the level of 5.25%-5.50%, the value of the rupiah has fallen, interest rates have soared, and share prices have fallen, and bond yields have increased.

The price of the US dollar, which in January 2023 was at IDR 14,979, is today IDR 15,880, far above the current year’s APBN assumption of IDR 14,800.

Bank Indonesia (BI) decided to increase BI7DRR by 25 bps to 6.00%. The Deposit Facility interest rate was increased by 25 bps to 5.25%, and the Lending Facility interest rate by 25 bps to 6.75%.

“There is almost no difference with FFR. “This condition causes inevitable depreciation of the rupiah and unstoppable capital outflow,” he said.

According to Primus’ records, in almost the last ten months, the JCI weakened 1.44% and today, October 31 2023, year to date, foreign investors recorded a net sell of IDR 11.341 trillion. In the Government Securities (SBN) market, there was also a net sale. As of October 26, 2023, year to date, the outflow of foreign funds from SBN was IDR 13.63 trillion.

“This condition causes the net buy position of SBN to decrease,” he said.

Meanwhile, said Primus, the flow of foreign capital out of SBN was triggered by the yield on 10-year T-Bonds in the US which had reached 4.856%. “Compare this with the 10-year SBN yield which is 7%,” he said.

“In the future, economic conditions will remain uncertain. “The uncertainty that has occurred since 2022 or post-pandemic, will still occur until 2024,” he said.

Optimism

Although the world economy is currently hit by pessimism, Primus continues to promote optimism for business actors. He hopes that the 2024 democracy party will run smoothly.

“We hope that the election will run peacefully so that business activities can run well and that the costs of the presidential and legislative election campaigns will have a big impact on public spending,” he said.

Primus said, since the 2004 presidential election, the economy has always grown positively and the composite stock price index (IHSG) has always increased. There has been a “decoupling” between economics and politics.

Primus fosters other optimism because Indonesia still recorded a trade balance surplus in the third quarter of 2023 of US$ 7.8 billion. This condition supports the prospects for current transactions to remain healthy.

“The position of foreign exchange reserves controlled by BI at the end of September 2023 was US$ 134.9 billion, equivalent to financing 6.1 months of imports or 6.0 months of imports and payment of government foreign debt,” he said.

Primus estimates that Indonesia’s balance of payments (NPI) this year will remain good with the current account in the range of a surplus of 0.4% to a deficit of 0.4% of GDP. In 2024, BOP is expected to remain maintained supported by the domestic economic outlook which remains good.

“Indonesia’s economic growth rate in 2023 is estimated to be above 5%. “In the second quarter of 2023, Indonesia’s economy will grow 5.17%, yoy,” he said.

Meanwhile, he said, inflation was under control according to target. In September 2023, inflation will be 2.28% yoy, down from inflation in August, 3.27%. There was a decline in inflation, but inflation in the volatile food group was 3.62%, yoy, up from 2.42% a month earlier.

Third, interest rates will decrease, at least starting in early 2023. It is impossible for bank interest to continue to bloom. When interest rates fall, funds will flow into the capital market.

Fourth, amidst high-interest rates, the number of retail investors remains large. In August 2023, the number of individual investors in the capital market will be 11.5 million, and 57% of them are millennial investors under the age of 45.

“This large number of local individual investors is a source of strength for the Indonesian capital market at a time when foreign investors are withdrawing their funds,” he said.

Investortrust provides literacy

At this special event, Primus also introduced Investortrust, a new media in the fields of economics, business, finance, and especially investment. Primus said that the managers of the Investortrust news room are editors who have experience in the fields of economics, business, finance and investment.

“Even though it only appeared in public on August 29 2023, Investortrust was quickly recognized by the public,” he said.

Primus said that Investortrust is here to provide financial literacy to the public, especially millennials — millennials and gen Z —, namely those born since the 1980s.

“They are what are called digital natives,” he said.

Primus said that through financial literacy, the number of them reaching 145 million or around 54% of Indonesia’s population is expected to become the golden generation in 2045.

“They must be supervised so that they have knowledge and expertise in managing finances. “Only in this way will they be able to become the golden generation, the generation that achieves financial freedom,” he said. (CR-7)

Original article in Bahasa Indonesia can be accessed here