Analysts reaction to Bank Indonesia Governor Perry Warjiyo stepping down
July 27 (Reuters) – Bank Indonesia’s Perry Warjiyo has left his post as governor, Indonesian Minister of State Secretariat Prasetyo Hadi said on Monday. A surprise resignation is likely to shake investors amid ongoing concerns about the central bank’s independence.
BI senior deputy governor Destry Damayanti was appointed as interim governor. Destry said Warjiyo resigned for personal reasons.
Here are some comments from analysts:
ANDİR MITRA, HEAD OF ASIAN MACRO AND INVESTMENT STRATEGY, BNY INVESTMENTS, SINGAPORE
“Governor Warjiyo’s unexpected resignation created a surprise in the market and raised questions about the adequacy of broader macrostabilization efforts. The transition now underway underscores a ‘personnel is policy’ approach to the transformation of Indonesia’s macroeconomic policy institutions.”
“The key uncertainty in the market is the appointment of the permanent governor of the Bank of Indonesia and what exactly the central bank’s policy directions and objectives going forward will be. Until these broader monetary uncertainties are resolved, or unless fiscal announcements surprise materially to the upside, the risk premium on the IDR is likely to remain high and any transitional leadership may face sharper trade-offs between managing growth and Rupiah stability.”
RANGGA CIPTA, CHIEF ECONOMIST, MANDIRI SECURITIES, JAKARTA
“A medium-term resignation would likely be read negatively by investors, as it could signal policy uncertainty. The bigger question is the independence of the central bank, as a fixed period would mean isolating the governor, and an early exit would test this. We think the choice of his successor will be more important for Indonesian monetary policy than the departure itself.”
CHRISTOPHER WONG, FX STRATEGIST, OCBC, SINGAPORE
“There could be an immediate weakness in the IDR as markets assess the implications for BI’s leadership and policy direction. However, with rupee stability remaining the immediate priority, the caretaker president is likely to maintain BI’s current pro-stability stance. Assuming an orderly transition and open policy communication, the initial uncertainty should fade and stability should gradually return.”
LAVANYA VENKATESWARAN, SENIOR ASEAN ECONOMIST, OCBC BANK, SINGAPORE
“The risks going forward are dual at this point. There is limited clarity on whether Destry’s appointment is temporary or permanent. If it becomes permanent, it will send a positive signal to market participants as policy continuity will remain. Conversely, if this appointment turns out to be temporary, there is a risk that the perception overhang will continue and the burden of maintaining stability will ultimately fall on the shoulders of the appointee.”
RADHIKA RAO, SENIOR ECONOMIST, DBS BANK, SINGAPORE:
“Governor Perry has played a pivotal role in guiding Indonesia’s economy through transition periods and external shocks, including the COVID-19 pandemic and, more recently, the crisis in West Asia. Under his leadership, the central bank has adopted a more integrated framework, using a mix of rate policy, liquidity tools, foreign exchange intervention and coordination with the government. This has provided BI with greater flexibility to manage the trade-offs between rupee stability, inflation, credit growth and financial sector resilience. Immediate handover of the leadership role ensures continuity of Policy.”
ANGUS MACKINTOSH, ASEAN EXPERT, ALETHEIA CAPITAL, SINGAPORE:
“Perry Warjiyo’s resignation is likely to be viewed negatively by the market, given that they are a stable couple with a good track record. With Destry, a senior deputy governor, stepping in initially, much will depend on who takes over. If Prabowo’s nephew (Thomas Djiwandono) steps in as deputy governor, the market will view it with skepticism, given that this is a very important technocratic post and BI must remain independent.”
(Reporting by Ankur Banerjee in Singapore; Editing by Lincoln Feast)
