Indonesia financial regulators assess geopolitical risks, impact to economy

Indonesia's economic growth likely slowed slightly to 5 per cent in the second quarter, its finance minister said on Friday, though she said authorities are monitoring geopolitical developments that could affect the domestic economy.

Minister Sri Mulyani Indrawati said household consumption, investment and improving exports had likely driven growth in the April-June quarter. The figure would represent only a slight slowdown from the 5.11 per cent gross domestic product growth recorded in the first quarter.

Her estimate tracks a Reuters poll of 24 economists that saw second-quarter growth in Southeast Asia's largest economy economic likely slowing a little to 5.0 per cent as exports moderated and high interest rates hurt consumption.

In a joint press conference with other regulators, Sri Mulyani said financial authorities discussed geopolitical developments to anticipate risks that could affect Indonesia's economy, including tensions in the Middle East, the war in Ukraine and elections in other countries.

For all of 2024, Indonesia's economic growth is expected to be within a range of 5 per cent to 5.2 per cent, she said.

Speaking at the same event, Bank Indonesia (BI) Governor Perry Warjiyo said the central bank's monetary policy priority remained financial market stability.

BI's benchmark interest rate should have come down in recent months as inflation was low, he said, but it could not cut rates yet because it was focusing on mitigating the spillover impact of global risks, including the rupiah exchange rate and capital outflows.

He said BI had previously anticipated the US Federal reserve would cut rates in December, but based on the latest meeting of its Federal Open Market Committee, there was a probability of a rate cut in September.

Sri Mulyani said Indonesian authorities should coordinate policy closely to handle impacts of global uncertainties, adding fiscal policy would be used to maintain price stability and increased economic activity was expected throughout this year.

She added a financial sector assessment programme by the World Bank and International Monetary Fund showed Indonesia's financial sector was resilient against global challenges.