Indonesia's economic growth contracted by -2,07% in 2020, being in the first recession in two decades since the Asian financial crisis in 1998. Even though it has continued to experience recession since the third quarter of 2020, economic growth is relatively better than -3,5% (yoy) global growth and slowly recovered in the fourth quarter of 2020 which was recorded at -2,19% (yoy). Although the impact of the Covid-19 crisis continues, Indonesia's economic growth is expected to recover gradually this year supported by a series of substantial policies to increase household and business confidence as well as the provision of adequate social assistance and the rollout of vaccines to reduce the rate of infection spread. Inflation is still far below the target and is not expected to increase sharply in the near future because demand is still stifled due to the Covid-19 pandemic which has damaged the economy and people's purchasing power. On the other hand, surprisingly, external conditions showed a glimmer of hope with a continued surge in portfolio inflows, continued monthly trade surpluses, and high foreign exchange reserves, thereby strengthening the stability of the Rupiah. Overall, taking into account the current domestic and external situation, we see that now is the right momentum for BI to cut the policy interest rate again by 25bps to 3,50% this month to support the economic recovery agenda while maintaining financial sector stability.

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