Bank Indonesia decides to hold BI rate steady at 5.75pc
Bank Indonesia in the Board of Governors' meeting today decided to hold the BI rate steady at 5.75%. The current policy rate is termed consistent with inflation forecast, which is expected to remain low and contained within its target range of 4.5%±1% in 2012 and 2013.
Bank Indonesia says in line with the dynamics of the economy and some policy measures that have been taken, external imbalances have started to improve, with declining current account deficit and the overall balance of payments that have turned to surplus. Rupiah also moved according to market condition, with abated depreciating pressure.
Meanwhile, Indonesia's economic growth remains sound, although slowed slightly as exports fell, reflecting a continued slowdown in the global economy. Bank Indonesia will continue to focus on policies to manage external balance to a sustainable level while also providing support for economic growth. Bank Indonesia will also continue to strengthen coordination with the Government to maintain macroeconomic stability and sustainable economic growth.
Bank Indonesia sees Indonesia's economic growth remains sound, although slowed slightly. In the Q3-2012, Indonesia's economy charted 6.2% growth, slighlty lower than earlier forecast, reflecting a continuing slowdown in exports. Buoyant domestic demand, mainly private consumptions and investment, continued to underpin growth. Going forward, Indonesia's economic growth is expected to pick up supported by strong private consumption and investment. Exports is also expected to perform better, supported by improvement in some of Indonesia's main trading partner countries, although remains overshadowed by uncertainty in the global economy. With that condition, Indonesia's economic growth in 2012 is expected to arrive at 6.3% and pick up to 6.3%-6.7% in 2013.
External imbalances have improved, as expected. Current accounts deficit in the Q32012 went down to 2.4% of GDP from 3.5% of GDP in the Q2-2012. Improvement in the current account balance was associated with better trade balance, as imports fell sharply, especially on consumer goods, while some non oil and gas exports commodities such as CPO has started to post positive growth. Capital and financial accounts posted a higher surplus, mainly driven by Foreign Direct Investment (FDI), and bring the overall balance in Q3-2012 to surplus. Going forward, the overall balance of payments in Q42012 is expected to record higher surplus, supported by lower current account deficit and increasing surplus in the capital and financial account , mainly in the form of FDI.