"If the government wants to achieve an economic growth rate of 6.8 percent for 2013, FDI must exceed US $15 billion and export growth must outstrip 7 percent," Bank Indonesia (BI) Governor Darmin Nasution said.
Jakarta (ANTARA News) - Bank Indonesia (BI) Governor Darmin Nasution said on Wednesday that raising foreign direct investment (FDI) and boosting export growth will help prevent an increase in the current account deficit.

"If the government wants to achieve an economic growth rate of 6.8 percent for 2013, FDI must exceed US $15 billion and export growth must outstrip 7 percent," he said during a meeting held to discuss the draft state budget of 2013 at the parliament building here.

He said the only other available alternative involves lowering the current account deficit, which by the second quarter of this year had touched US $6.9 billion or 3.1 percent of the gross domestic product (GDP), by raising fuel oil prices.

Nasution termed this as an unfeasible option.

In the past year FDI has reached US $15 billion. If this figure touches US $20 billion, a current account deficit expansion will not occur as the additional investment will offset any increase in the deficit, he stated.

The rise in the current account deficit is also a result of higher fuel oil imports, so the government is trying to offset the increase by raising fuel oil prices, Nasution noted.

"The current account deficit jumped in the second quarter of 2005 as well because of higher imports and a mini economic crisis. What the government must do now is raise fuel oil prices," he said.

At the time, following the government announcement of a hike in fuel oil prices, BI also upped its key interest rate or BI rate, which led to the weakening of the rupiah against the US dollar, he said.

"It took one or two quarters for this adjustment to be completed, following which the economic growth rate returned to normal," Nasution pointed out.

The government also offset the current account deficit by raising fuel oil prices in 2008. In response, BI also adopted the same policy as it had done earlier in 2005, he stated.

Nasution said he also expects the balance of trade to improve next year based on higher exports, although imports should remain high on account of strong domestic demand.(*)

Editor: Heru Purwanto
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