Bank Indonesia wants to become 'hawkish'

Mataram (The Jakarta Post/ANN) - Bank Indonesia (BI), will focus on maintaining economic stability, not economic growth, this year, BI Deputy Governor Perry Warjiyo said on Thursday at the release of BI's 2012 annual economic report, "Maintaining Stability to Support Sustainable Economic Growth".

His statement signals that the central bank is preparing to adopt a hawkish stance and tighten up the economy, having been seen as being monetarily loose for a long time.

The central bank will focus on Indonesia's deteriorating external imbalances, and managing recent inflation blips, he said. Monetary tightening will prioritise macro-prudential measures, not interest rate adjustments.

After imposing down payment limits of 20 to 30 per cent on housing and automotive loans last year, BI is mulling stricter loan-to-value (LTV) requirements for industries such as automotive and construction, whose products suck in high levels of imports.

"We are examining the possibility of macro-prudential regulations for producers, having previously applied them only to their customers," said Perry.

He explained that LTV regulations for industry "are not intended to impede credit growth, but improve the risk management of the industries".

The newly appointed deputy governor argued that macro-prudential measures were necessary since the central bank forecast only modest improvement in Indonesia's external imbalances, which became the major worry for investors and policymakers throughout 2012.

By the end of 2013, Indonesia's current account deficit is expected to decline slightly to 2.5 per cent of gross domestic product (GDP), from 2.7 per cent last year, mainly caused by stalling economic recovery reducing exports, coupled with high imports of oil for subsidised fuel.

The central bank also forecast the consumption of subsidised fuel to top 50 gigalitres this year, higher than the allocated quota - a situation that, if no immediate resolution is agreed, would prompt "negative sentiment to fiscal sustainability that in turn will apply further pressure to the rupiah", according to BI's annual economic report.

BI also vowed to maintain its independence ahead of the 2014 elections in the country, especially as recent developments show that many central banks - notably the Bank of Japan, the Federal Reserve and the European Central Bank - have started issuing quantitative easing and other monetary policies whose implementation was attributed to a strong push from politicians.

With Indonesia recently subject to rising inflation and a widening current account deficit, calls have mounted for BI to switch to a hawkish monetary footing - a term for an inflation-focused central bank that prioritises monetary tightening to maintain economic stability, which usually comes at the expense of economic growth.

BI was widely perceived as pro-growth and monetarily loose under Governor Darmin Nasution. The central bank has kept its benchmark rate at an historic low of 5.75 per cent since February last year.

The central bank will keep the benchmark rate unchanged at least until the end of this year, not making any adjustment "unless there is a severe shock in price level", such as a sudden increase of price of subsidised fuel, said Perry.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Lupita Nyong'o's $150,000 Oscars dress stolen from hotel
    Lupita Nyong'o's $150,000 Oscars dress stolen from hotel

    The $150,000 pearl-studded, custom-made Calvin Klein dress worn by Oscar-winning actress Lupita Nyong'o at this year's Academy Awards has been stolen, police said on Thursday. The gown, embellished with 6,000 natural white pearls, was stolen from Nyong'o's room at the London Hotel in West Hollywood, during the day on Wednesday, a spokesman for the Los Angeles County Sheriff's Department in West Hollywood said. "Ms Nyong'o was not in the room at the time of the theft," Deputy John Mitchell …

  • US-led strikes on IS after group seizes 220 Christians
    US-led strikes on IS after group seizes 220 Christians

    The US-led coalition has carried out air strikes against the Islamic State group in northeastern Syria, where the jihadists have launched a new offensive and kidnapped 220 Assyrian Christians. The raids on Thursday struck areas around the town of Tal Tamr in Hasakeh province, the Syrian Observatory for Human Rights said, without giving information on possible casualties. The town remains under the control of Kurdish forces, but at least 10 surrounding villages have been seized by IS, along …

  • Militants abduct more Christians, smash ancient artifacts
    Militants abduct more Christians, smash ancient artifacts

    BEIRUT (AP) — Islamic State militants seized more Christians from their homes in northeastern Syria in the past three days, bringing the total number abducted by the extremist group to over 220, activists said Thursday. …

  • 3 Pinays on Forbes power women list
    3 Pinays on Forbes power women list

    Three Filipina executives, who are all daughters of known business tycoons in the country, made it to Forbes’ list of the 50 most powerful businesswomen in Asia. Teresita Sy-Coson, vice chairman of SM Investments and chairman of BDO Universal Bank, was included in the list for the fourth year in a row since its inception. “Under her (Sy-Coson) lead SMIC became the largest listed company on the Philippine Stock Exchange by market cap. Also in the 2015 list is 70-year-old Helen Yuchengco-Dee, …

  • 13 of 15 SAF survivors to leave PNP hospital
    13 of 15 SAF survivors to leave PNP hospital

    Thirteen of the 15 Special Action Force (SAF) policemen who survived the bloody firefight with Muslim rebels in Mamasapano last month are ready to go home after a month of medical treatment, a police official said yesterday. Philippine National Police (PNP) spokesman Chief Superintendent Generoso Cerbo Jr. said the two remaining survivors will have to stay in hospital for further treatment, one of whom has shrapnel embedded near his spine. One of the two SAF commando survivors is still …

  • US sends spy plane to patrol disputed sea
    US sends spy plane to patrol disputed sea

    The United States has deployed its newest and most advanced surveillance aircraft for patrols over the West Philippine Sea and South China Sea. The P-8A Poseidon aircraft completed more than 180 flight hours from Feb. 1 to 21 from Clark Air Base, according to the US Navy’s 7th Fleet. …

  • Review: SKK Mobile V2, a P3,999 watered-down LG G2
    Review: SKK Mobile V2, a P3,999 watered-down LG G2

    How well does this P3,999 offering from an underdog in the local mobile industry stack up against the competition? Let's find out. …

  • No coercion, force in sea row – France
    No coercion, force in sea row – France

    France renewed its call for a peaceful resolution of the West Philippine Sea dispute during a meeting between its leader President Francois Hollande and President Aquino at Malacañang. “We reiterated the importance of maintaining peace and stability in Southeast Asia and promoting maritime security, freedom of navigation and the peaceful settlement of disputes in accordance with international law, including UNCLOS (United Nations Convention on the Law of the Sea),” Aquino said in a statement …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options