Universitas Gadjah Mada
Faculty of Economics and Business

Bank of Indonesia (BI) estimates economic growth in 2011 will reach the range of 6.0% -6.5% and increase to 6.1% -6.6% in 2012. Balance of payments is estimated to have a surplus of USD 16.4 billion and foreign reserve certainly continues to increase to $ 112.6 billion from USD 96.2 billion. In fact, investment which has been increasing since 2010 is expected to continue so as to make economic growth more balanced.

This was announced by Deputy Governor of Bank Indonesia, Ardhayadi, in general lecture in the Auditorium of Master of Science in Economics, Faculty of Economics and Business UGM, Friday (11/3). The UGM graduate of 1976 majoring in Accounting delivered that higher economic growth in 2011 is supported by exports which will be increasingly identified and higher. Meanwhile, import grows rapidly along with the strong investment activity and consumption despite the socio-political crisis in the Middle East and North Africa that has the potential to impede global oil supplies and disrupt oil distribution, causing uncontrolled increase in world oil prices. In fact, the increase in global commodity prices, including oil and food, is estimated to continue up to 2012.

Ardhayadi admitted the high price of international commodity will cause turbulence in currency and stock market quickly if not mitigated and managed properly. The spectacular shock can cause panic of global market players. "The panic of market players in many countries can trigger a crisis," he said.

Currently, the increase of oil price is getting higher along with increasing demand and speculation factors that also increase. Meanwhile, non-oil commodity prices are also predicted to increase though slower than 2010 due to high demand, weather anomalies, oil price increase, and speculation for some commodities such as corn and wheat. "Bank of Indonesia is required to play better role in formulating policy and strategy to maintain monetary stability and the national financial system," he said.

Bank of Indonesia and the government will continue to sharpen the programs to reduce the rate of inflation and exchange rate. In addition, Bank of Indonesia still commits to direct the BI rate in order to get medium-term inflation target range of 3.5%. Determination of the BI Rate was done to adjust inflation and inflation expectation leading to inflation target that does not sacrifice the growth. "With lower and more stable inflation and the improvement of structural constraints, the economic growth of 7.5% in 2015 can be achieved," he concluded.

Source: Gusti/UGM

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