Indonesia growth might fall back to 2009 levels

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Indonesia's finance minister Chatib Basri
Indonesia’s finance minister Chatib Basri

Indonesia’s Finance Minister Chatib Basri said on February 23 that economic growth in the country may slow this year to the least since 2009 as the government reins in the current-account deficit, according to a Bloomberg report.

Southeast Asia’s largest economy may grow between 5.5 and 5.8 per cent in 2014, Basri said. The state budget had assumed expansion of 6 per cent. Gross domestic product expanded 5.8 per cent in 2013.

Growth in Indonesia, where elections are due this year, is slowing after central bank governor Agus Martowardojo embarked on the country’s most aggressive rate-tightening cycle in eight years within a month of taking the helm in May. Basri said slower expansion will help deliver a targeted current-account deficit of between 2 and 2.5 per cent of GDP, down from a record gap of 4.4 per cent in the second quarter of 2013.

“We need to continue to slow down the economy until this target is achieved,” Basri said. “Then the next government has room for fostering faster growth.”

The central bank said this month that economic growth this year will be at the lower end of its forecast range of 5.8 to 6.2 per cent. According to the nation’s central bank, the deficit, which helped spur an exodus of funds from Indonesian assets and weakened the currency in 2013, may narrow to 2.5 percent this year, down from about 3.3 percent in 2013.

In 2013, the rupiah’s 21 per cent drop was the biggest among Asian currencies. It was one of the so-called fragile five, a description used by Morgan Stanley to describe currencies most vulnerable to capital flight as the US central bank dials back economic stimulus.

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Reading Time: 2 minutes

Indonesia’s finance minister Chatib Basri

Indonesia’s Finance Minister Chatib Basri said on February 23 that economic growth in the country may slow this year to the least since 2009 as the government reins in the current-account deficit, according to a Bloomberg report.

Reading Time: 2 minutes

Indonesia's finance minister Chatib Basri
Indonesia’s finance minister Chatib Basri

Indonesia’s Finance Minister Chatib Basri said on February 23 that economic growth in the country may slow this year to the least since 2009 as the government reins in the current-account deficit, according to a Bloomberg report.

Southeast Asia’s largest economy may grow between 5.5 and 5.8 per cent in 2014, Basri said. The state budget had assumed expansion of 6 per cent. Gross domestic product expanded 5.8 per cent in 2013.

Growth in Indonesia, where elections are due this year, is slowing after central bank governor Agus Martowardojo embarked on the country’s most aggressive rate-tightening cycle in eight years within a month of taking the helm in May. Basri said slower expansion will help deliver a targeted current-account deficit of between 2 and 2.5 per cent of GDP, down from a record gap of 4.4 per cent in the second quarter of 2013.

“We need to continue to slow down the economy until this target is achieved,” Basri said. “Then the next government has room for fostering faster growth.”

The central bank said this month that economic growth this year will be at the lower end of its forecast range of 5.8 to 6.2 per cent. According to the nation’s central bank, the deficit, which helped spur an exodus of funds from Indonesian assets and weakened the currency in 2013, may narrow to 2.5 percent this year, down from about 3.3 percent in 2013.

In 2013, the rupiah’s 21 per cent drop was the biggest among Asian currencies. It was one of the so-called fragile five, a description used by Morgan Stanley to describe currencies most vulnerable to capital flight as the US central bank dials back economic stimulus.

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