‘5.4PC GDP GROWTH TOO OPTIMISTIC’
BI deputy governor urges nation to aim for higher credit ratings and says 5.1-5.2pc target still achievable this year
INDONESIA’S central bank said economic growth of 5.4 per cent this year is too optimistic and the nation should aspire for higher credit ratings to catch up with Southeast Asian peers.
“In our view, the growth rate should be higher than last year,” said Bank Indonesia Senior deputy governor Mirza Adityaswara, here, on Friday.
“Maybe 5.4 per cent is still a bit too aggressive, but we think 5.1 to 5.2 per cent is still a possible number to achieve this year.”
While Southeast Asia’s biggest economy is gradually recovering, it faces risks from a slowdown in China and weaker prices of coal and palm oil, the nation’s main commodity exports.
President Joko Widodo has pledged to boost growth to seven per cent during his term in office, but economists surveyed by Bloomberg predict expansion of under 5.5 per cent until 2019.
His government has made inroads on some economic reforms, helping it win an investment-grade score from S&P Global Ratings this month. Despite its economic size, smaller neighbours including the Philippines, Thailand and Malaysia all enjoy higher ratings from S&P.
“We have to use the improvement in the credit rating to challenge ourselves to get further improvement,” said Adityaswara.
Keeping the current account deficit under control was key, which meant the nation needed to diversify into non-commodity exports and push for stronger tourism, he said.
Global funds poured a record US$6 billion (RM25.62 billion) into rupiah securities this year, helping to drive Indonesia’s 10-year yield down by the most in Asia.
“Considering that the global situation is quite stable, what we can expect is funds from Japan, and also funds from maybe European and American pension funds that are purposely not in Indonesia yet to come,” said Adityaswara.
Bank Indonesia has kept its benchmark interest rate unchanged at 4.75 per cent for seven months, refraining from providing more stimulus to the economy after six rate cuts last year. Bloomberg
While Indonesia is gradually recovering, Southeast Asia’s biggest economy faces risks from a slowdown in China and weaker prices of coal and palm oil.