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JAKARTA. The central bank apparently has little interest in easing its monetary policy in the immediate future to support growth, even though economic growth recently slumped to its lowest level in five years.
The statistics office reported on Tuesday that Indonesia posted only 5.12 percent in economic growth in the second quarter of this year, a level not seen since 2009 when Indonesia felt the pinch of the global financial crisis.
“The growth moderation is still in line with the need to stabilize our economy, especially the need to manage the current-account deficit and inflation,” Bank Indonesia (BI) Deputy Governor Perry Warjiyo told The Jakarta Post in a text message.
Last year, the central bank hiked the benchmark BI rate by a cumulative 175 basis points to 7.5 percent to put the brakes on Indonesia’s too-fast economic growth, which was seen as posing a risk of overheating, as evinced by the widening current-account deficit.
Asked whether BI’s monetary tightening had been too excessive and thus arresting economic growth, the deputy governor responded: “We don’t think so.”
“We estimate that the current-account deficit for the second quarter will still be relatively large at about $9 billion,” he went on. “But, we see significant improvement in the surplus in the non-oil and gas current-account balance.”
Annual economic growth slowed significantly after reaching a peak of 6.5 percent in 2010, when the country took advantage of the commodity boom that propelled its commodity-based exports.
Throughout last year, Indonesia expanded by a mere 5.8 percent – the first time growth fell below 6 percent since 2009 – as the country’s exports were hurt by the economic slowdowns in China, the US and the Europe. The government had targeted economic growth to reach at least 5.5 percent this year. (Satria Sambijantoro)
