Lessons from the Expansionary Macroeconomic Policy during the Pandemic

Abstract

The Indonesian economy ended the year with a solid growth of 5.01 % year on year (y-o-y) in the fourth quarter of 2022. Although it was higher than last year, the inflation rate has also shown signs of deceleration with a figure of 5.51% (y-o-y). The monetary policy of the United States’s central bank, the Federal Reserve, has caused the rupiah (IDR) to depreciate rather sharply against the US dollar (USD), but the rate stayed below IDR16.000/USD. As a preemptive response to this development, Bank Indonesia has also raised the BI 7 Day Repo Rate to 5.5 %. The performance of Indonesia’s balance of payment showed signs of significant improvement compared to both the previous quarter and the previous year.
This review will examine the above developments in detail by exploring Indonesia’s macroeconomic indicators, specifically its economic growth rate, balance of payment, investment and trade, inflation, and currency exchange rate. This review will also briefly look at Indonesia’s fiscal and monetary policy throughout the pandemic.