BI Seeking Sustainable Current Account Deficit Instead of Surplus

Jakarta (Antara) - Bank Indonesia said it is seeking a sustainable current account deficit instead of surplus to cope with the prevailing economic condition. A current account deficit of 0.25-2.5 percent of the country's GDP is sustainable for the economy, Bank Indonesia Governor Agus Martowardojo said here on Wednesday. "It is not necessarily to be in surplus, which could end up in hard landing" Agus said. He said the country's current account deficit has dropped from US$9.9 billion or 4.4 percent of the GDP in the second quarter to US$8.4 billion or 3.8 percent of the GDP in the third quarter of this year. He said hard work is needed to reduce the current account deficit that Indonesia could move a step forward to be safe from the middle income trap. "Indonesia has the potential to climb to the level of upper middle income with on going expansion of the middle class. If we fail to respond properly we could fall into the middle income trap and it would be too late to enter the upper level," he said. He said the current account deficit was caused not only by the trade deficit, but was also attributable to deficits in service and income account as well as oil and gas trade. Therefore, a number of policies have to be adopted such as tax incentives for foreign companies and progressive tax on motor vehicles to reduce imports of oil fuel, he said. "We have to be able to control imports, but we don't want surplus in current account as what we need is sustainable and good quality economic growth," he said. (*)