Handling of COVID-19 is key to the short-term recovery outlook. Meanwhile, economists at Standard Chartered maintain a positive tactical bias on IDR on UST yield stabilisation, manageable external balance and BI stabilisation policy.
Monetary and fiscal policy to stay accommodative
“We recently lowered our 2021 GDP growth forecast to 4.1% from 4.5% on a resurgence of COVID-19 cases The government tightened mobility restrictions in Java and Bali as new covid cases reached a new high, straining the health system; we estimate that every one-month period of restrictions may lower GDP growth by 0.5ppt.”
“Vaccination rollout has been accelerated to 1mn doses per day; at the current pace, herd immunity may be reached in 2022 (versus the government’s target of end-2021). Vaccine supply will be the key determinant.”
“We forecast policy rate hikes of 25bps in Q4-2022 and Q1-2023; expect 150bps of reserve requirement ratio (RRR) hikes in H1-2022. Low inflation and negative output gap should allow BI to normalise policy gradually and synchronise it to Fed policy
“The government maintained its budget deficit at 5.7% of GDP for 2021, despite higher health and social spending. Fiscal consolidation is likely to continue as the government targets a deficit below 3% of GDP in 2023.”
“Tactical bullish view on the IDR; we maintain our year-end USD-IDR forecast at 14,600. We expect the 2021 C/A deficit to stay low at 0.9% of GDP on better global demand, a structural rise in value-added exports, and higher commodity prices.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD extends gains above 1.0700, focus on key US data
EUR/USD meets fresh demand and rises toward 1.0750 in the European session on Thursday. Renewed US Dollar weakness offsets the risk-off market environment, supporting the pair ahead of the key US GDP and PCE inflation data.
GBP/USD extends recovery above 1.2500, awaits US GDP data
GBP/USD is catching a fresh bid wave, rising above 1.2500 in European trading on Thursday. The US Dollar resumes its corrective downside, as traders resort to repositioning ahead of the high-impact US advance GDP data for the first quarter.
Gold price edges higher amid weaker USD and softer risk tone, focus remains on US GDP
Gold price (XAU/USD) attracts some dip-buying in the vicinity of the $2,300 mark on Thursday and for now, seems to have snapped a three-day losing streak, though the upside potential seems limited.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
US Q1 GDP Preview: Economic growth set to remain firm in, albeit easing from Q4
The United States Gross Domestic Product (GDP) is seen expanding at an annualized rate of 2.5% in Q1. The current resilience of the US economy bolsters the case for a soft landing.