"We are undertaking stabilization efforts by focusing on reducing the current account deficit and keeping the inflation rate in check," Finance Minister Chatib Basri said.Jakarta (ANTARA News) - Indonesia`s economy might grow at a slower pace this year as a result of the government`s policy to curb the widening current account deficit and stabilize the fragile rupiah, said Finance Minister Chatib Basri.
"We are undertaking stabilization efforts by focusing on reducing the current account deficit and keeping the inflation rate in check," he said here on Friday.
He also praised Bank Indonesia for raising its benchmark interest rate by 25 basis points to 7.25 percent on Thursday, two weeks after it raised the rate by 50 basis points on August 29.
The move is part of efforts to control public consumption and curb use of imported goods, Chatib said.
"We must accept the high interest rate regime. But if it is raised further, our income, imports and growth will fall," he warned.
By raising the interest rate, however, credit growth will drop and the inflation rate will remain manageable, he noted.
"With the high interest rate, the domestic exchange rate will be competitive," he added.
Bank Indonesia raised its key interest rate by 25 basis points to 7.25 percent on Thursday to protect the rupiah from the threat of capital flights ahead of the imminent tapering of the US monetary stimulus next week.
Further, Chatib said the national economy might grow at a slower pace of 5.9 percent this year and could have an impact on the real sector, as well as have the potential to cause lay-offs in the industrial sector.
"If the economy grows at a slower pace, fewer jobs will be created as many companies cannot expand their businesses. Therefore, the government has provided incentives as mitigation efforts to protect the real sector," he said.(*)
Editor: Heru Purwanto
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