Indonesia holds rate, sees stronger global growth, inflation

    Indonesia's central bank held its benchmark reference rate steady at 5.75 percent, as expected, saying this rate was consistent with its forecast for inflation to remain low and within the bank's target range for the next two years. Economic growth is expected to strengthen in 2013.
    Bank Indonesia, which has held rates unchanged since a 25 basis point cut in February, said it expects global economic growth to improve and lead to higher commodity prices in 2013 and 2014 following an easing of monetary policy in both advanced and some emerging countries in response to sluggish growth and moderate global inflation.
    "Going forward, Indonesia's economic growth is expected to pick up, buoyed by strong domestic demand and better exports performance along with improvement in the global economy as well as higher international commodity prices," Bank Indonesia said in a statement.
    Other factors supporting growth next year is higher domestic economic activity related to the general election, better purchasing power, strong investment and "optimism" over the prospects for Indonesia's economy.
    Indonesia's Gross Domestic Product rose 3.2 percent in the third quarter from the second for annual growth of 6.17 percent, slightly down from 6.4 percent rate in the second quarter.
    Bank Indonesia expects fourth quarter 2012 growth of around 6.2 percent, bringing the 2012 growth rate to 6.3 percent, the same growth the bank forecast last month when it also forecast 2013 growth of 6.3-6.7 percent.

    The International Monetary Fund forecasts 2012 Indonesian growth of 6.0 percent, rising to 6.3 percent in 2013. In 2011 Indonesia's economy expanded by 6.5 percent.
    Indonesia's inflation rate eased to 4.3 percent in November, from 4.6 percent in October, and the central bank forecasts inflation to remain within the bank's target range of 4.5 percent, plus/minus one percentage point, in 2013 and 2014.
    Bank Indonesia expects inflation to hit the mid-point target at the end of this year.
    The bank also said that the rupiah currency depreciated in the second and third quarters and has stabilized in the fourth quarter and is "expected to remain stable supported by the balance of payments which is expected to remain in surplus," supported by a narrower current account deficit and a surplus in the capital and financial accounts.

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