Bank Indonesia Revises Down GDP Growth, Interest Rate Kept at 5.75%
The central bank of Indonesia (Bank Indonesia, or BI) kept its benchmark interest rate at 5.75 percent and its overnight deposit facility rate (FASBI) at four percent as the country's core inflation figure is still within the target range of the central bank (3.5-5.5 percent). Core inflation currently stands at 4.12 percent (YoY). However, as the price of subsidized fuel is expected to rise in June, inflation may increase and could trigger a policy response by Bank Indonesia later this year.
Indonesia's central bank also revised down its forecast for Q2-2013 economic growth. According to the institution, growth in Q2-2013 will most likely resemble growth in the first quarter of the year (6.02 percent). Previously, it expected Indonesia's gross domestic product (GDP) to increase 6.20 percent in Q2-2013. Underlying reasons for the downgrade are the weak recovery of Indonesia's exports as well as lower domestic demand. Relative high inflation has reduced purchasing power and thus impacted on household consumption. Moreover, uncertainty about the fuel price hike makes people cautious. For full-year 2013, it maintained its forecast of 6.2-6.6 percent economic growth.
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