Chatib Basri: Indonesia's Economic Growth Slows Down Further in 2014
Following a meeting of the G20 Finance Ministers, Indonesia's Finance Minister Chatib Basri said in an interview that this year's economic growth in Indonesia may slow to the lowest level since 2009 as the government and central bank implemented various measures aimed at curbing GDP growth in order to safeguard financial stability. Basri said that GDP growth in the range of 5.5 to 5.8 percent is a more realistic forecast. Slower growth will help to realize the government's aim to reduce the current account deficit to between 2.0 and 2.5 percent of GDP.
Indonesia's current account deficit had been at an alarming record high of USD $9.9 billion (or 4.4 percent of GDP) in the second quarter of 2013 and was partly responsible for large-scale capital outflows from Southeast Asia's largest economy in 2013. By the end of last year, the deficit eased to an overall 3.3 percent of GDP.
Basri's expectation is thus lower than the target set in the original State Budget (APBN 2014) as well as the proposed revision of the State Budget's GDP growth. In the APBN 2014, the Indonesian government targets economic growth of 6.0 percent. However, the government has already proposed to revise this forecast to the range of 5.8 to 6.0 percent. Meanwhile, the country's central bank (Bank Indonesia) expects GDP growth in 2014 at the lower end of 5.8 to 6.2 percent.
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Basri said that Indonesia has had reasonable success doing its homework last year - increasing prices of subsidized fuels and hiking interest rates - in order to restore foreign confidence while fostering financial stability. One important matter is to find a way for foreign funds to be channeled to infrastructure development in emerging economies.
On Sunday (23/02), the G20 member countries announced to have decided to target collective GDP growth that is two percent higher than previous targets for the next five years. As the outlook for economic growth in advanced economies has improved, demand for Indonesia's exports is expected to rise.