Indonesian Economy Outlook
Financial sector resilience during semester-II 2009 was adequately maintained, supported by conducive macroeconomic conditions including, among others, low inflation and interest rates, as well as controlled exchange rate volatility. The banking industry, the dominant industry in the financial sector, remained sound; reflected by sufficiently high CAR and profitability, high-quality earning assets and relatively well-managed liquidity. The stock market and bounds market both indicated improvements compared to the previous semester. However, a number of sources of instability remained, including among others, the enduring global crisis, slow credit allocation and a surge in short-term capital inflows. Looking forward, risk mitigation measures require further strengthening to ensure financial system stability and a favorable outlook.
Resilience = kegairahan
Volatility = mengambangnya
Bounds = surat obligasi
Enduring = berkepanjangan
Inflows = pemasukan
Mitigation = keringanan
Measures = aturan
Favorable = menguntungkan
Surge = turun naik
1. SOURCES OF INSTABILITY
1.1. Slow Global Recovery
The global economic crisis has not completely subsided. While the crisis persists a number of new problems have emerged triggering a subsequent rise in global instability, for example the Dubai World financial crisis and the fiscal crisis in Greece. Therefore, tight vigilance is required to avoid a domino effect creating vulnerabilities in the domestic financial sector and economy.
Subsided = reda
Persist = tetap berlangsung
Subsequent = yang berikutnya
Vigilance = kewaspadaan
Vulnerabilities = rentan, mudah terkena
1.2. Sluggish Credit Growth
Post-global crisis, bank credit growth experienced a significant slowdown, in particular foreign exchange (forex) credit. In 2009, total credit grew by just 10% (y-o-y). This issue requires serious attention as languid credit disbursements has the potential to spur instability. On a macro scale, the decline in credit growth places additional pressures on future economic growth. From a micro-perspective, the decline in credit growth causes difficulties for the corporate sector and households in terms of obtaining funds to finance their business activities. This, in turn, potentially undermines the debt repayment capacity of the corporate and household sectors, which in general are bank debtors. From a macro and micro standpoint, both have the potential to raise nonperforming bank loans (NPL).
Sluggish = melempem
Languid = lesu
Disbursements = pembayaran
Spur = memacu
Decline = kemunduran
Undermines = merusak, mengganggu
Standpoint = sudut
1.3. The Rise in Short-Term Capital Inflows
Short-term capital inflows are resurging back into Indonesia. This is not only due to the attractive returns offered by financial instruments in Indonesia, but also due to the improved sovereign rating as a result of robust domestic economic performance amid pressures stemming from the global crisis. The rise in short-term capital inflows requires close vigilance as it is vulnerable to sudden reversals which could disrupt financial stability.
Returns = hasil,keuntungan
Sovereign = para penguasa
Robust = sehat,kuat
Amid = ditengah – tengah
Reversals = pemutaran balik
Disrupt =mengacaukan, mengganggu
1.4. Possibility of Greater Operational Risk
Operational risk can arise due to, among others, natural disasters and fraud. The recent trend of more frequent natural disasters, like earthquakes and floods, that have beset Indonesia has necessitated a contingency plan that can maintain the functioning of financial infrastructure under any conditions so as to minimize potential losses. In addition, greater financial system dependence on information technology, for example through the pervasive use of ATM cards and Internet banking, has dictated the immediate requirement for all-encompassing security measures and risk mitigation against fraud.
Fraud = penipuan
Beset = menimpa
Necessitated = mengharuskan
Contingency = kemungkinan
Pervasive use = pembobolan
Encompassing = yang mencakup
1.5. The Real Sector and Infrastructure
Real sector conditions remained suboptimal despite corporate and household performance surpassing that reported during the peak of the global crisis in quarter IV to emerge, including the inauguration of the ASEAN China Free Trade Area (ACFTA) at the beginning of 2010. Furthermore, infrastructure in the country remains unsatisfactory reflected by, among others, disruptions in the distribution network that precipitated inefficiencies and created a high-cost economy. If the problems confronting the real sector are permitted to persist and no resolution is sought, financial sector instability will materialize in the long term.
Surpassing = melebihi
Inauguration = peresmian, pembukaan
Precipitated = menimbulkan
Materialize = terwujud, menjelma
1.6. Inadequate Legal Protection
Financial sector instability will appear if policymakers do not receive adequate legal protection. Without clear legal protection, public officials in the financial sector will be unwilling to take the immediate decisions necessary to avoid the widespread impacts of a crisis. This issue requires the attention of all related stakeholders to ensure that financial system stability remains under control.
Unwilling = enggan
Publisher :
Bank Indonesia
Jl. MH Thamrin No.2, Jakarta
Indonesia
