Indonesia's central bank cuts rates as economy tanks

Agence France-Presse

Posted at Jun 18 2020 05:55 PM

Indonesia's central bank cuts rates as economy tanks 1
A woman wearing a protective face mask walks at a traditional market, as the government eases restrictions amid the coronavirus disease (COVID-19) outbreak, in Jakarta, Indonesia June 16, 2020. Ajeng Dinar Ulfiana, Reuters

JAKARTA - Indonesia's central bank on Thursday cut interest rates for the third time this year and scaled back its growth projections as the global pandemic batters Southeast Asia's biggest economy.

Policymakers at Bank Indonesia reduced the key lending rate by 25 basis points to 4.25 percent, while lowering their full-year economic growth forecast to between 0.9-1.9 percent, from a previous 2.3 percent.

The move comes days after the government warned of a 3.1 percent contraction in the second quarter -- the latest in a series of downward revisions.

Central bank governor Perry Warjiyo signaled there was "still room" to cut rates further in the coming months, but added that he expected growth to rebound next year.

"This (rate) decision is consistent with efforts to maintain stability and boost the economy during the COVID-19 era," he said Thursday.

Indonesia has announced a stimulus package worth some $48 billion to help offset the impact of coronavirus, which forced a wide-scale shutdown that hammered growth, including in the key tourism sector. 

"We expect further gradual easing over the coming months," research house Capital Economics said, citing a "very poor outlook" for the economy.

"Virus containment measures are having a huge impact on the economy," it added.

This month, the Southeast Asian archipelago, home to nearly 270 million people, said it was rolling out a "new normal" policy that included gradually easing movement restrictions in a bid to head off economic collapse.

But Indonesia's infections are mounting with cases topping 40,000 on Wednesday, surging beyond neighboring Singapore to mark the region's highest.

The country has also recorded 2,276 deaths. But with one of the world's lowest testing rates, the true scale of the public health crisis is widely believed to be much bigger.