Bank Indonesia (BI) held a hybrid event on Monday (21/03/2022) to talk about the Group of 20 and the key issues it will hopefully assess throughout the year, especially the financial recovery of countries after the pandemic. The event was titled Encouraging Accelerating Economic Recovery and Maintaining Stability Amid the Normalization of Developed Country Policies and Geopolitical Tensions.

Perry Warjiyo, Governor of Bank Indonesia, spoke at Leader’s Insight, a discussion streamed live on BI’s Instagram, Facebook and YouTube accounts. His segment focused on building capacity and raising awareness among stakeholders in daerah (remote areas) and how the G20 relates to them.

“We’re on the road to recovery, but the road ahead won’t be easy,” Perry said.

He then listed the three issues that would be explored at the event: the outlook for the global economy and the obstacles that may arise, the G20 under Indonesia’s presidency and its role in encouraging global recovery, and the Indonesia’s responsibility to lead by example and serve as a source of inspiration.

Highlighting the increase in the Indonesian economy year-on-year, BI assures that the country’s economy will improve with economic growth estimated between 4.7 and 5.5% in 2022, supported by an increase exports and household spending. However, a problem that may arise is the unbalanced recovery of countries, especially with the tremendous growth of the United States and China, which cannot be compared to other developing countries.

The importance of purchasing vaccines, improving access to health care, stimulus spending and the unpaid debts of most African countries must be taken into account when it comes to financial expenditure .

“Because the ability to recover from COVID-19 is not balanced. Developed countries can provide vaccinations quickly; developed countries can provide bigger stimulus – fiscal stimulus, monetary stimulus. But in developing countries, capacity is limited,” Perry said.

He further explained that these three factors could become obstacles on the road to economic recovery, especially with regard to the Recover Together, Recover Stronger theme announced by Indonesia as the host of the G20 this year.

The first is the normalization of policies in advanced economies, confirmed by the US Federal Reserve raising its target federal funds rate. Inflation in the United States, as expected, will cause ripples and affect interest rates globally, which will then halt or slow the rate of economic recovery in countries that are already at the train. This is an example of how unbalanced recovery rate in different countries becomes a complication and countries with stronger economies will need to have a good plan and a clear communication system to avoid problems that may arise overseas.

Second, Perry spoke about the impact of the scarring effect on the economy, including recovery and sectoral transformation efforts in the real sector to improve competitiveness and increase productivity, as well as the transition to a green economy. and sustainable finance.

The third escalation of geopolitical tensions between Russia and Ukraine, which are influencing the global economic recovery due to soaring international prices of raw materials, both energy and food, thus intensifying inflationary pressures in a number of countries. In addition, disruptions in the global value chain impact distribution activities and trade volume as well as global economic growth, while a sudden shift in capital to safe-haven assets poses a threat to stability. foreign exchange and exchange rate performance.

The second topic that was discussed at length was how to foster global recovery under Indonesia’s G20 presidency. Together with Finance Minister Sri Mulyani, Perry defined the six priority points for the financial chain. The first is to find an exit strategy to sustain the recovery and ways for G20 countries to avoid the fallout caused by the exit policies of countries with better economies, as Perry explained in the previous session. .

Perry also revealed that it had been raised in meetings and had been well received by other countries. He assured that the standardization strategy will follow well-calibrated, well-planned and well-communicated principles.

The next point is how to deal with the scarring effects to ensure future growth, manage the impact of the crisis by increasing productivity, maintaining sustainable growth, as well as focusing on employment, human resources and the country’s financial and corporate sectors.

The third point is the transformation of payment systems in the digital age. Countries should discuss the implementation of a cross-border payment system which has not yet been planned. Perry pointed out that Indonesia can be an example of digitizing payment systems, with some of the country’s unicorn companies operating as an example.

“The pandemic has reminded us that if we build the economy, we have to pay attention to the environment; green economy,” Perry said of the fourth point.

He explained that it was based on a green economy and sustainable finance, more precisely on the risks induced by global warming which are combated by going towards zero carbon emissions.

The fifth point is then central to inclusiveness in finance, primarily the advantage of open banking to push and support the productivity of micro, small and medium-sized enterprises (MSMEs), women and the younger generation in the field financial. Perry reinstated the belief that MSMEs are the backbone of the country’s economy and should be maintained as much as possible.

The final point is international taxation, which involves the need to discuss the implementation of a framework with the Organization for Economic Co-operation and Development (OECD) and other G20 member countries on the erosion of Tax base and profit shifting (BEPS) resulting from the exploitation by multinational enterprises of discrepancies due to differences in tax laws between countries.

After Perry gave the audience an overview of capacity building on G20 issues, BI Deputy Governor Dody Budi Waluyo took over from Medan, North Sumatra, with a talk titled Exit Strategies and Scarring Effects Post COVID-19, while Deputy Governor Doni P. Joewono was in Makassar, South Sulawesi to talk about Indonesia’s digital economy system. Deputy Governor Juda Agung, meanwhile, was in Semarang, Central Java, to also address exit strategies and scarring effects. The hybrid event went live around the same time in three different cities.

In Makassar, the keynote speaker was the Head of BI South Sulawesi Representative Office, Causa Iman Karana, with five speakers: Dhia Anugrah Febriansa (Director of Business Telecommunication and Information Services BAKTI Kominfo RI), Ibrahim Kholilul Rohman (Senior Research Associate Indonesia Financial Group), Hendra David (CEO PT Hensel Davest Indonesia), Andi Nur Bau Massepe (FEB Unhas Lecturer/ISEI Makasar) and Feronika (Operasional Senior Manager Regional Enterprise Business & Government Business Service Divisi Telkom Regional VII ). Deputy Governor Doni explained that the event in Makassar would focus on the economic digitalization strategic plan, one of the issues highlighted by Jokowi for the G20. He revealed that the leaders would extensively discuss a cross-border payment system via a central bank digital currency (CBDC), during the G20 summit. He added that this is a particularly important issue for BI, as the system should follow the mandates given by the central bank of each country.

Meanwhile in Medan, the event was attended by Agus Tripyono on behalf of North Sumatra Governor Edy Rahmayadi. A keynote address was delivered by BI’s Dody, and speakers included Yoga Affandi, Director of the BI Institute, Hendri Saparini Economist and Founder of CORE Indonesia and Ramli, Director of the Medan Branch of the Association of Indonesian Economists (ISEI). Dody reiterated the three issues that would be raised by President Jokowi in front of other G20 leaders: global health architecture, digital transformation and sustainable energy transition. He further pointed out that the inflation problem currently facing the country is a significant impediment to economic recovery in North Sumatra.

Returning to what was mentioned about the normalization of countries by Perry, during the Semarang event, Judah warns against the risks of carrying out political normalization too quickly or too slowly. If done too quickly, it can harm the stability of the financial system. However, if done too slowly, it will distort the recovery of the economy. Other speakers were Chief Economist of Bank Permata Joshua Pardede, Anung Herlianto (Head of OJK Banking Research and Regulation Department) and Harry Nuryanto (Chairman of Central Java Chamber of Commerce). Alongside Judah, the event was also attended by Peni Rahayu (Assistant for Economics and Development at the Central Java Regional Secretariat), who delivered the keynote address.