Indonesian Government Preparing Additional Policy Approach Package
The government of Indonesia is busy preparing an extra package of policy responses aimed at stabilizing Indonesia's financial markets. Previously, the government had released a sort of 'rescue package' in late August after the rupiah depreciated sharply and the country's stock indices plunged. Panic had emerged due to the looming end of the Federal Reserve's quantitative easing program. Coupled with internal issues, it resulted in robust capital outflows from Indonesia. The new package will be released in October.
The October package aims to limit imports, support exports, strengthen the structure of Indonesia's industries (spur the development of an intermediate industry which will limit the import of these products), and prevent or stop capital outflows (particularly foreign capital) by making the country's economic fundamentals more appealing. It also intends to make Indonesia less dependent on external influences. These external influences include the policy changes of the Federal Reserve and weak global demand for Indonesia's exports (mainly commodities).
The August package focused on improving the performance of the country's rupiah, overcoming the widening current account deficit, stimulating investments and fostering economic growth and people's purchasing power. However, there are no quick fixes to the economy and it will take months before the impact of these packages are felt - if implemented thoroughly.
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