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Developments in Monetary Sector 2014:Q2
The level of international reserves in May 2014 reached USD 107.048 billion, which was an increase of USD 1.485 billion compared with the position in April 2014. The international reserve position can finance 6.2 months of imports, which criteria makes it fulfill international adequacy standard (three months of imports). Subsequently, in April 2014, international reserves reached USD 105.56 billion, which represented an increase of USD 2.97 billion compared with the position in March 2014. The increase in the level of international reserves came as a consequence of an increase in oil and gas exports during April–May 2014 period and improvement in capital flow to Indonesia in May 2014. Bank Indonesia, through PBI No. 14/25/PBI/2012 on foreign exchange revenue derived from exports and external debt related withdrawals seemed to have registered success in forcing exporters to deposit their revenues in foreign exchange banks. Consequently, the policy has contributed to improving Indonesian international reserve position. Meanwhile, in March 2014, international reserve position decreased by USD 149 million which represents a decline of 0.145% compared with the level registered in the previous month. The decline in the international reserve position is attributable to efforts by the government to repay USD 2 billion of its bond obligations that reached maturity. To that end, Bank Indonesia, expects the international reserve position to decline in quarter II-2014. On a seasonal basis, quarter II is often characterized by maturity of securities that require payment of interest, dividends, and royalties.
Latest Economic Developments 2014:Q2
The declining in net exports has caused the economic slowdown and significant increase generally in the government expenditure and energy subsidies in particular
Indonesian economy posted steep slowdown in quarter I-2014. Indonesian economy posted growth of 5.21% (y-o-y), in quarter I-2014, which represented a decline compared with 5.72% (y-o-y) posted in quarter IV-2013. Moreover, economic growth posted in quarter I-2014, was far lower than 6.03% (y-o-y), which was registered in the same period in the previous year.
Slower economic growth posted in quarter I-2014 is largely as a result of a significant decline in net exports. The significant contraction in net exports, adversely affected economic growth in quarter I-2014. The -0.78% (y-o-y) contraction of exports posted in quarter I-2014, was large enough to push net exports into negative territory, albeit -0.66% (y-o-y) contraction in imports. The decline in net exports is by and larger attributable to a decrease in exports of minerals such as coal and coal concentrates, which is a reflection of the performance of the mining sector that posted contraction of -0.38% (y-o-y). The poor performance of the mining sector is largely as a direct consequence of the coming into force of Mining Law No.4/2009 on exports of unprocessed minerals with effect from 12 January 2014. Nonetheless, sluggish growth of Indonesian economy is also due to persisting uncertainty in the global economy, as reflected by decline of economic growth of the economy of China from 7.7% (y-o-y) in quarter IV-2013 to 7.4% (y-o-y) in quarter I-2014, which by implication adversely affected the performance of Indonesian economy.
ASEAN: Registers Optimum Economic Potential amidst Global and Regional Economic Instability
In general, as the year 2013, came to an end, economies in ASEAN (Association of South East Asian Nations) economic region were able to register slower economic growth hence have not yet to reach their full potential. Sub optimal regional economy, was largely attributable to the performance of Indonesia and Thailand in 2013, which are key players in the region, which fell below the level achieved in 2012. Based on year on year growth, in 2013, Indonesia and Indonesia registered economic growth of 5.8% and 2.9%, respectively, which was lower than 6.2% and 6.4%, in 2012, respectively. Such a situation is cause for concern considering the fact that one of the engines of growth in Asia, ASEAN only registered anaemic growth of 5% over the last decade, which falls far short of economic potential amidst formidable economic challenges associated with the formation of ASEAN Economic Community 2015.