The central bank of Indonesia cut interest to 4%, a drop of 25 base points

A drop in interest rates in Indonesia

The central bank of Indonesia has further reduced the interest rate to 4%. This decision came on Thursday, July 16, 2020. South Asia’s biggest economy struggles to rise above the trials of the pandemic. The lending rate went down by 25 basis points reaching 4 percent on the back of a looming recession.

According to the governor of the central bank, Perry Warjiyo, the lending rate was further curtailed in the wake of hedging the emerging risks since the economy is struggling. However, he notified of the positive signs following the stimulus package and ease in lockdown. \”But we\’re not back to pre-pandemic levels,\” Warjiyo warned.

First Recession Since 1998

Research house Capital Economics added to the discussion saying that the further increase in lockdown is underway since the output remains “weak”. Finance minister Sri Mulyani Indrawati warned against Indonesia\’s economy to contract by 4.3 percent. Following a further slump in Jul- September period.

This would be the first recession in Indonesia since the 1998 Asian financial crisis. Marking two consecutive quarters of negative growth in the economy. Indonesia also announced a stimulus package worth 48billion dollars, recently. To aid a large-scale shutdown reflecting later in hampered growth, predominantly in the tourism sector.

COVID 19 and the Indonesian Economy

The death rate due to COVID-19 has crossed 80,000 with over 3,800 deaths. Statistics are still being downplayed for a country with the lowest coronavirus testing rates. For a country that is not ready to stand up to mobility constraints, keeping the administrative measures high and intact is integral to its elements for sustainable growth.