Posted on 28 Jan 2014
A senior economist at Standard Chartered Bank Indonesia, Fauzi Ichsan, has said that it is unlikely that Indonesia’s economic growth in the next year or two will be driven by increases in exports.
He said America’s shale-gas revolution had had a significant impact on the global economy so Indonesia should not expect increases in coal, palm oil or petroleum prices in the next 12 to 18 months.
“As 60 percent of Indonesia’s exports are of commodities, it is hard to foresee economic growth deriving from increases in exports,” said Ichsan as quoted by Antara news agency. He said this would have an effect on the current-account deficit in Indonesia.
“To reduce the current-account deficit, we have to reduce imports by raising interest rates,” said Ichsan. The economist added that the government would probably not increase fuel prices or reduce the importation of oil to reduce the country’s current-account deficit.
“In this election year, it will be difficult for the government to carry out measures that are unpopular. As a result, Indonesia’s economic growth will have problems staying above 6 percent,” said Ichsan.
However, he was optimistic that the 2014 elections would provide a stimulus to Indonesia’s economy, with a contribution of between 0.2 and 0.3 percent to economic growth.
Standard Chartered has projected that Indonesia’s economic growth in 2014 will reach 5.8 percent with an average inflation rate of 6.3 percent. The average rupiah exchange rate is predicted to stand at Rp 12,000 per US dollar and Bank Indonesia (BI) interest rates at 8 percent.
