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BI: Indonesia to Fare Better in 2014

Jakarta (ANTARA News) – Bank Indonesia (BI) predicted the Indonesian economic condition would be better in 2014 than in 2013 with balanced growth and narrowing current account deficit.

“The economy is expected to expand 5.5 – 5.9 percent,” Governor of the central bank Agus Martowardojo said here on Thursday night.

In 2013, the countrys economy grew 5.78 percent.

Adequate supply or production and infrastructure will create a sustainable economic growth, Agus said.

Shortfall in supply or production against demand will widen current account deficit, he said.

“The condition would be worse if infrastructure remains inadequate, resulting in loss of confidence and capital flights as in 2008,” he said.

He said in 2013, BI adopted a mixed policy raising its benchmark interest rate 175 basis points to 7.5 percent to stabilize rupiah, to strengthen monetary operation, and coordination with the government and cooperation among central banks.

It is expected with a number of policies to be adopted , inflation could be kept lower at around 4.5 percent in 2014, current account deficit narrowing to less than 3 percent of the GDP and bank credits growing only 15-17 percent, he said.

Despite the favorable trend, Agus warned against a number of possible risks to be faced.

The risks include the impact of the Feds Exit Policy, Chinese economic slowdown, vulnerability of developing markets, foreign debt and fiscal risks, he said.

“There are still risk from the Feds tapering off although it has been predicted by the market,” he said.

After the financial stimulus cut, there would be an increase in the Feds Fund Rate which would have global impact, he said.

He said fiscal risk is related to the countrys oil lifting falling short of the target.

Oil lifting so far this year is only 798,000 barrels per day much below the target of 870,000 barrels as set in the 2014 state budget, he pointed out.

“This would result in an increase in oil imports and widening of current account deficit,” he said.

Source : www.antaranews.com, Friday, March 21 2014