I was told that there are banks in Indonesia that pay .18% interest. Is that correct?

Answer 1

.18% is nothing! Do you mean 18%?

Answer 2

It is not unusuall for countries to have higher interest rates on deposits. Only profligate counties try to run low interest rates or highly developed ones. For others it is a sure shot method for inflating prices in the economy and this may create employment, but sometimes prices rise to heights which are difficult to retrieve back later. If it doesn't rise then this will cause some form of shallow economic activities and will have to be stimulated by other means. Usually low interest rates is followed by rising wages, rising inflation, rising employment and so and so forth. Usually this is the outcome expected to stimulate stagnant economies to growth. Indonesia is an oil producing country. Most of the Southeastasian countries had similar interest rates. The post Reagan era of world economy adopted some of his stimulant tactics which worked for America to other nations, low interest rate regimes. Usually as a rule of thump the ROI prevailing in a country should be the base interest rate. Interest rate is actually the growth rate in Economy and in US it is very little around 2 to 5% and so their interest rates are lower. But other countries especially developing countries need to have higher growth rates.
It is a double whamy basically ie; if the interest rates are reduced drastically it will raise price levels and moving back to higher rates will be very difficult since it will cause recession or stagnation or sometimes even stagflation due to high wage levels and low umeployment levels caused on the way back up.

Answer 3

Lets assume you meant 18%. Nice uh? Better than what Mr. Greenspan used to give us eh? There is only one little detail: in order to calculate the real yield of your money at the end of a given period you must calculate the interest (in this case 18%) and deduct the inflation rate over the same period (which you need to reinvest in order for your capital not to loose his value). The result is the real interest. Chances are that in countries where the interest rate is 18% , the inflation (official maybe not real) is 15 or 16%. Sorry buddy, in economics there is no free lunch.

Answer 4

Yes used to be but no more now. Please understand that the Bank can give that high interest because of the risk as well.

It used to be that way and you can get that high return provided you deposit in rupiah which can be very risky for you

You are taking a big risk of the currency exchange rate and furhermore your money deposited into the Bank is not guaranteed by the Goverment.

So Understand the health of the Bank is very important as well, because your money can just disappeared together with the liquidation of the bank

Answer 5

Unfortunately, you have to convert your money to rupiahs to acheive high rates in Indonesia. However, the inflation rate exceeds the interest rate paid by the banks. With the declining exchange rate and fees you will likely end up with less money than you started.

Bank Indonesia Interest Rate link... (currently around 9% short term)

http://www.bi.go.id/web/en/Indikator+Moneter+dan+Perbankan/Suku+Bunga/default.aspx?pageid=1

Answer 6

Technically .18% is 0018% so if that is what you are reading, it is under 2%.