"The expectation of 6.3 percent is not realistic anymore. We may be able to achieve 5.9 percent growth if we manage to stabilize the Indonesian currency and repress the current account deficit," added the minister.
Earlier, Finance Minister Chatib Basri revealed that the government's stimulus package to keep the widening current account deficit (CAD) in check will cause the Indonesian economy to grow at a slower pace this year.
"The economy will have to grow at a slower rate if we want to contain the current account deficit. Therefore, the government has projected economic growth for this year at 5.9 percent," he said.
Basri praised Bank Indonesia for its decision to raise its benchmark interest rate by 50 basis points, from 6.5 percent to 7.0 percent, as part of its efforts to prevent the current account deficit from widening further.
However, he pointed out that the BI rate hike would slow down credit growth, which could affect investments, one of the key drivers of national economic growth, in a negative way.
The minister stated that a drop in investments would have a negative impact on the real sector and could result in mass layoffs. The government has introduced a stimulus package to avoid mass layoffs, he continued.
"We cannot turn a blind eye to the present situation. Therefore, we have introduced a package of economic policies to avoid mass layoffs. We had predicted that Bank Indonesia would take this step," said Basri.
Reported by Satyagraha
Translated and edited by Amie Fenia Arimbi