• Bank Indonesia (BI), in its April monetary policy meeting, kept its key policy rate (7-day Reverse Repo Rate) unchanged at 3.50%, after a 25bps cut in February 2021
• BI guided that its decision was in line with the need to maintain the stability of the Rupiah exchange rate against increasing uncertainty on global financial markets
• In Singapore, non-oil domestic exports (NODX) rose by 12.1% yoy in March from 4.2% in February, higher than market expectations, supported by both electronic (24.4%) and non-electronic (9.4%) exports.

Singapore Recorded Fourth Straight Months of NODX Expansion

Bank Indonesia (BI), in its April monetary policy meeting, kept its key policy rate (7- day Reverse Repo Rate) unchanged for the second straight month at 3.5%, after a 25bps cut in February this year. BI had lowered its key policy rate by a total of 150bps since 2020 in order to support the economy from the negative impact of the pandemic. BI guided that its decision was in line with the need to maintain the stability of the Rupiah exchange rate amidst persistently elevated global financial market uncertainty despite projected low inflation. We believe recent development in financial market, especially on expectation of rising inflationary pressure in the US, resulted in some weakness to Rupiah, which depreciated by 3.2% against US dollar due to some foreign outflows. This was also reflected in BI’s MPC statement, where it noted that elevated financial market uncertainty and UST yield volatility will likely persist, where such developments eroded capital inflows and intensified currency pressures in most developing economies, including Indonesia.

On economic growth, despite the optimism on global economic outlook, BI revised lower its 2021 real GDP growth to 4.1% - 5.1% from 4.3%-5.3%. Going forward, we believe there is still room for BI to lower rates, if necessary, as inflation remains low at 1.37% in March (1.4% in February), below BI’s inflation target of 2-4%. The concern still lies on consumption as it is yet to recover due to limited mobility as partial lockdown until 1st week in May is imposed despite the rolling out of vaccines. BI guided that orderly implementation of the vaccination program, coupled with the disciplined application of Covid-19 protocols, remains the key to faster domestic demand recovery.

In Singapore, the country’s non-oil domestic exports (NODX) rose by 12.1% yoy in March from 4.2% in February, supported by both electronic (24.4%) and non electronic (9.4%) exports. This was the fourth straight month of NODX expansion recorded. March’s imports rose to 17.9% from -4.6% in February, the first positive growth since April 2020. For 1Q21, NODX rebounded by 9.7% yoy (-0.5% in 4Q20). Growth in electronics exports was supported partly by low base from a year ago and increase demand of integrated circuits. We believe the country’s NODX performance will remain uncertaint and record smaller positive growth in the months ahead, where slower growth in regional trading partners such as Malaysia, Thailand and Indonesia (following reinstatement of stricter containment measures after a recent surge in Covid-19 cases), may potentially weigh on Singapore’s NODX performance due to lower intra-regional trade in the near term.

Source: Affin Hwang Research - 22 Apr 2021