Indonesian central bank will keep implementing a tight monetary policy this year in a bid to guard the Southeast Asia's largest economy from possible risks of the global economy amid efforts to narrow current account gap, Agus Martowardojo, the governor of the bank, said here Thursday.
Despite the easing trend of inflation, which is expected to end at 4.5 percent this year, and the lower current account deficit target in 2014, the bank still has to be prepared for the internal and external threats, Martowardojo said at the State Palace.
The bank has aggressively risen its benchmark interest rate by 1.75 percentage points to 7.50 percent from last June to November, which has been successful in putting Indonesia on a right course to fare better among the emerging economies battered by capital outflows. "In general, we must pay attention to the global condition and domestic condition," he said.
Among the external factors that the bank should anticipate are the possibilities of rising interest rate in the United States, weakening economy in China, the main destination of Indonesia's exports and the economic turmoil in developing economies.
Domestically, Martowardojo said the bank was scrambling to narrow current account deficit to below 3 percent of the GDP. "Now we want the current account deficit to whittle down to 21 to 22 billion U.S. dollar or below 3 percent of the GDP,"he said in comparison with the 28 billion U.S. dollars' current account deficit in 2013 and 24 billion U.S. dollars in 2012.
The central bank has revised down its forecast for economic growth this year to the range of 5.5 to 5.9 percent, from the previous projection of 5.8 to 6.2 percent, due to slowing domestic consumption and investment and subdued exports.