Big data helps Bank Indonesia plug gaps in official figures

JAKARTA • Bank Indonesia is turning to the machines to help make its policy more effective. In a country of 260 million people spread across more than 17,000 islands, gathering the right kind of information at the right time presents a unique challenge to the central bank.

Explosive growth in Internet use and social media among Indonesia's young and growing population has opened up new data sources that policymakers are using to plug gaps in the official numbers.

Take jobs data. The statistics agency publishes employment data every six months, so the central bank is supplementing that with information extracted from online job portals, said Ms Yati Kurniati, head of Bank Indonesia's statistics department. In the absence of official figures, the bank is also collecting data on the secondary property market from online housing sources to give it a better sense of the health of the economy.

"Every central bank is talking about the digital economy: how we measure it and how it will have an impact on our policy," Ms Kurniati, who took on her new role in March, said in an interview.

"The machines can screen very large amounts of information," she said, although "we still have to use our own eyes to make sure the context is appropriate".

The department's work is feeding straight into policy decisions. For 15 days before an interest rate announcement, the unit scours social media, news sites and other content on the Internet to monitor public perception and rate expectations, and transmit that to Governor Agus Martowardojo and his board.

Response from policymakers has been "very positive", Ms Kurniati said.

Bank Indonesia is increasingly turning to so-called big data sources - everything from online stores to social media and datasets produced by tech companies - to get ahead of the information curve. 

With private spending contributing more than half of the economy, measuring consumer patterns and labour market dynamics is key to making policy effective.

The latest puzzle over sluggish consumer spending is a case in point. Despite the aggressive easing in monetary policy, retail sales growth remains well below the double-digit pace of past years, while private consumption has failed to pick up strongly. That's one of the reasons - along with a subdued inflation environment - why policymakers resumed rate cuts this year, in August and September. 

Information gathered from big data sources and the Internet of Things can't replace conventional statistics but plays a crucial role, said Ms Kurniati.

"Big data cannot solve all the problems," she said. "It helps to provide information more rapidly and it fills a data gap." It can help "complete the big picture", she said.

The growth in online shopping means Bank Indonesia is now receiving "flows of information" from some of the biggest players in Indonesia's e-commerce market, Ms Kurniati said, without disclosing the names of the companies. 

Tokopedia and Alibaba Group's Lazada are among the most popular online retailers in Indonesia. Online transactions surged more than 400 per cent to 17.8 trillion rupiah (S$1.79 billion) last year from 2015 and are already at 13.8 trillion rupiah in the first eight months of this year, according to Bank Indonesia. 

The proportion of Indonesians with access to the Internet remains low - at about 51 per cent, compared with Malaysia at about 70 per cent - reflecting the growth potential for e-commerce. Macquarie Research estimates the market can expand from US$8 billion (S$10.9 billion) now to US$65 billion by 2020.

Ms Charu Chanana, an economist at Continuum Economics in Singapore, said the expansion of data sources will help Bank Indonesia respond to challenges more effectively.

"When you know the exact regions or the exact sectors that are not responding to government measures, then you can dig down into those" and seek a targeted solution, she said.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 19, 2017, with the headline 'Big data helps Bank Indonesia plug gaps in official figures'. Print Edition | Subscribe