Current account deficit could weaken rupiah: Central bank

"One factor that weakens the exchange rate of rupiah is declining current account performance," Dody Budi Waluyo, Bank Indonesia`s executive director of economic research and monetary policy, said.
Jakarta (Antara News) - Bank Indonesia said Indonesia`s current account deficit could help weaken the country`s currency rupiah.

Indonesia recorded current account deficit at US$24.18 billion or 2.7 percent of the country`s Gross Domestic Product (GDP) in 2012.

"One factor that weakens the exchange rate of rupiah is declining current account performance," Dody Budi Waluyo, Bank Indonesia`s executive director of economic research and monetary policy, said here on Wednesday.

Dody said raising interest rate is not the right way to cope with problem caused by falling value of rupiah.

"The measures taken so far in propping up rupiah such as by relaxation of hedging and market intervention by Bank Indonesia have been right," he said.

Earlier, Bank Indonesia spokesman Difi A Johansyah attributed the country`s current account deficit to shrinking surplus in trade of commodities other than oil and gas and increase in deficit in oil and gas trade.

Difi said in the non oil/gas sector, there was slight improvement in global demand and slowing growth in domestic demand but the gap remained wide between the export and import growth rates.

The rise in exports was insignificant compared to increase in imports, he added.

In the oil and gas sector, an increase in exports was not enough to offset the surge in imports as oil fuel consumption especially in the transport sector is growing fast, he said.

In 2012, the country`s balance of payments still had a surplus of US$165 million thanks to a surplus of US$24.91 billion in financial and capital account.

The balance of payments surplus , however, shrank from US$11.9 billion in the previous year.(*)

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