Agus Martowardojo, Governor of Indonesia's central bank, expects the Indonesian economy to consolidate in 2014. The country is currently experiencing an economic correction with GDP growth slowing to 5.62 percent in the third quarter of 2013. Martowardojo said that the current account deficit still needs time to reach a healthy level. Indonesia's current account deficit stood at USD $8.4 billion (equivalent to 3.8 percent of the country's GDP) in the third quarter of 2013, down from USD $9.8 billion (4.4 percent of GDP) in the second quarter.
A slowdown in imports, brought on by reduced domestic demand due to slowing economic growth, will have a good impact on the trade balance.
Furthermore, Martowardojo expects that Indonesia's economic growth in 2014 will range between 5.8 and 6.2 percent. This assumption is based on the expectation that Indonesian exports will grow amid an improving global economy next year.
Inflation is likely to fall back to a more moderate level. According to the latest data from Statistics Indonesia (BPS), Indonesia's inflation recorded 8.32 percent (year-on-year) in October. Martowardojo believes inflation to fall back to 4.5 percent (plus or minus one percent) in 2014 as policies of the Indonesian government and central bank have already led to stable administered prices as well as food products prices.
Credit growth in Indonesia's banking sector is expected to fall to 16 percent (yoy) next year amid a higher interest rate environment. Bank Indonesia raised its benchmark interest rate to 7.50 percent last week. In full year 2012, credit growth is most likely to reach a growth pace of 18 percent.