What is an Economic Stabilization?
Economic stabilization is a condition in which economic development takes place in a controlled and prolonged manner. That is, the development of the flow of objects/services and the flow of money goes balance.
Economic stability results in price stability. With a normal economy to low pay or affordable for citizens.
On the contrary, if the economy is not normal until the payment to be spent by citizens will be large. Thus complicating the future of investment.
Economic stability results in price stability. With a normal economy to low pay or affordable for citizens.
On the contrary, if the economy is not normal until the payment to be spent by citizens will be large. Thus complicating the future of investment.
Quoted from Bank Indonesia's formal website, low and normal inflation is a prerequisite for sustainable economic development. Where to provide efficacy for the increase of the welfare of citizens.
This means that inflation control is based on the consideration that large and abnormal inflation shares negative consequences with the socioeconomic state of the citizens.
Bank Indonesia distributes 3 meaning price stability, as follows:
Large inflation causes real incomes of citizens to continue to fall so that the standard of living of the citizens decreases and the conclusion makes all people, most notably the poor increase in poverty.
Abnormal inflation is about to generate uncertainty for economic actors in making decisions. Empirical experience shows that abnormal inflation will complicate citizens' decisions in carrying out consumption, investment, and products whose conclusions demean economic development.
The higher level of domestic inflation compared to the level of inflation in the country of the person next door makes the real domestic interest rate so uncompetitive that it can share the pressure on the value of the rupiah.
Position of price stability in the economy
Normal prices want to cause inflation to be more controlled so that the macro-economic situation of a country should be good.
The rate of inflation can affect the state of the economy in the country as well as the changing value of the rupiah. Bank Indonesia has established the program as a strategic measure of inflation control, as follows:
- Affordability of prices
- Availability of supplies
- Smooth distribution
- Effective communication
The 10 steps taken by the Indonesian government in protecting Indonesia's economic stabilization are:
1. Protect the sustainability of the balance of payments or foreign exchange by requiring all SOEs to place all foreign exchange results in banks in the country in 1 clearinghouse. BUMN is required to inform data about the income and foreign exchange needs to the office of the state-owned enterprise's department and its transactions are carried out through banks ( State-Owned Banks) on a weekly basis and updated daily.
2. Protect the sustainability of the balance of payments or foreign exchange and strengthen infrastructure development by strengthening the implementation of projects that have found financing commitments both bilateral and multilateral.
3. Protect liquidity stability and avoid the formation of price wars by instructing SOEs not to carry out the transfer of funds from bank to bank.
4. Protecting the confidence of market actors towards The State Debt Message by implementing sun market stability is the government together with BI carrying out the purchase of SUN in the secondary market. SUN buybacks are tried in stages in measurable quantities.
5. Protect the sustainability of the balance of payments or foreign exchange by using bilateral swap arrangements from the Bank of Japan, Bank of Korea, and Bank of China if needed.
6. Protect the sustainability of exports by distributing guarantees against the risk of payment from buyers by providing a means of Redis onto export money orders with recourses effective from November 1.
7. Protecting the sustainability of the most important economy in real terms by reducing the CPO export levy to zero percent as of November 1.
8. Protect fiscal sustainability 2009. The steps to be taken to protect the sustainability of the State Budget will be announced quickly after finding the approval of the House of Representatives in the next 2 days (Thursday).
9. Avoid illegal importation from November 1. There are 2 initial steps, issuing terms on the importation of certain commodities are garments, electronics, food and beverages, children's toys, and shoes, can only be imported by registered importers as well as verification obligations at loading ports. Second, establish certain ports that are open for certain goods. The ports of Tanjung Priok, Tanjung Emas, Tanjung Perak, Belawan, Soekarno Hatta Airport, Makassar Port and Bandar Juanda.
10. Increase surveillance of scattered objects by forming an integrated task force between institutions starting November 1.
Price stability is special the price of the principal is able to protect the stability of the political situation. Residents do not want to be afraid of rising prices and fear of hitting the supply of objects.
When citizens take into account the price is about to rise, until there is panic buying or massive buying that ends with a scarcity of objects.
Protecting price stability must be tried synergistically and harmoniously by the government and citizens.