The central bank of Indonesia has cut its interest rates by 25 basis points to 4.75% to prevent the impact of the COVID-19 outbreak that hammers the country’s travel, tourism and trade industries.
Although Indonesia has not reported any confirmed case of the deadly virus, officials are worried about the fallout from the epidemic.
The closure of factories in China has resulted to production shortages and the travel restrictions have lessen inbound tourism to Indonesia.
“Of course, uncertainty in calculating the impact of COVID-19 remains high… We are still observing and studying the impact of the virus spread, ” said Central bank governor Perry Warjiyo in an interview.
Based on reports, it is the first reduction of the bank since October last year. Other Asian countries have similarly trimmed bank rates during the past weeks. These include the Philippines, Thailand and Sri Lanka.
Meanwhile, the Indonesian bank has also slashed its economic growth from almost 5.1-5.5% in 2019 to only 5-5.4% this year.
“The government had been forecasting a pickup in growth this year to 5.3 percent but that’s now under threat because of the virus outbreak,” wrote the Indonesian news website, The Jakarta Post.
In its published article, the English-language newspaper furthered that COVID-19 may also cause inflation in Indonesia as most supply chains in China were disrupted.
Indonesia is also expecting a hit on exports with China being its leading importer of major commodities like coal and palm oil.