The International Monetary Fund (IMF) praised the Indonesian government's policy approach to safeguard the country's financial stability amid external shocks in 2013 and hopes that the new government, which will be inaugurated in October 2014, continues the economic reform agenda. Changyong Rhee, Director of the IMF's Asia Pacific Department, said that Indonesia - Southeast Asia's largest economy - is currently on the right track and forecast to grow 5.4 percent in 2014, slightly lower than the 5.78 percentage growth in 2013.
Faced with sharp rupiah depreciation in 2013, Indonesia's central bank (Bank Indonesia) raised interest rates (from 5.75 percent in June 2013 to 7.50 percent in November 2013) and continued efforts to reform the country. Starting from late May 2013 (when the Federal Reserve started to speculate about a possible end of the US quantitative easing program), the rupiah depreciated over 21 percent against the US dollar. Rhee said that what happened last year was in contrast to what happened in 1997, when the Asian Financial Crisis erupted causing the exchange rate to plummet.
"The important matter is whether the new Indonesian government continues the economic reform agenda. The government has essentially made great progress so far", Rhee said at a Briefing on Asia and Pacific. Rhee particularly praised the government of President Susilo Bambang Yudhoyono for the fuel subsidy reduction (conducted in June 2013). This step was taken in an effort to improve the current account deficit (which hit a record high in 2013) and to renew confidence in the Indonesian rupiah exchange rate.
"Curbing the fuel subsidies was a step that is very difficult because it has implications for the level of inflation as well as political support. Still, the Indonesian government was brave enough to take this step," Rhee said.