ladies and gentlemen, 67. i am aware completely that everything that i have conveyed regarding improvement of production structure on the supply side could not be materialized in the near term. nonetheless, i hold the view that not much time is available to keep postponing steps in materializing them. 68. indonesia ’ s position as a middle income country which is progressing to become a high income country requires us to rethink the relevance of economic growth model that we have always been implementing. indonesia as a middle income country could no longer rely only on cheap labor wages and extractive activities. it is about time for us to switch towards a growth model that emphasizes increased industrial capabilities. 69. also within that context, the whole efforts in overcoming the structural deficit in the supply side need to be mounted as a joint effort in building an innovation ecosystem across indonesia, as a “ new growth model ”. in that ecosystem, diffusion of technology, r & d and innovation activities, intellectual property rights, risk capital and education activities, interact with each other without barrier and supported by the availability of reliable connectivity both physical and digital. 70. encompassing all of those, we can expect that the national economy will transform to become more reliable, efficient, and globally competitive, with sustainable economic growth in a stable economic environment. respected audience, [ economic prospect 2014 ] 71. considering those economic challenges and the policy direction which will be taken by bank indonesia and government, it can be expected that our economy in 2014 will be in a consolidation phase [ figure 10 ]. bis central bankers ’ speeches figure 10 cyclical economic forecast 72. this consolidation is tied to the still unfinished economic correction process in rectifying our current account deficit, which is expected to decrease in 2014. imports which are increasingly manageable, along with the recovery process within the domestic economy are expected to support the improvement of the current account balance. 73. economic growth in 2014 is expected to improve within the range of 5, 8 – 6, 2 %. this prospect is supported by improvement in export along the improvement of global economy and domestic demands. however, projection of current account balance and potential downside risk in economic growth will require attention considering that the process of slowing global economy is still ongoing. the prospect could change direction if the process of global economic recovery is stopped, as happened in 2013. 74. from the perspective of price, we project that inflation in 2014 will be back under control, within the target range of 4, 5±1 %. this is

same time, the micro structure of foreign exchange market shows improvement as indicated by the increase in the volume of interbank transactions and a more healthy price discovery in the forex market. a lower off - shore non - deliverable forward rate ( ndf ) compared to the spot rate indicates a more liquid market [ graph 6 ]. graph 6 foreign exchange market 19. the high level of inflation following the hike of subsidized fuel prices has returned to its historical pattern [ graph 7 ]. this development suggests that the second round impacts of the hike of subsidized fuel prices were restrained. although the administered and volatile food prices have significantly increased, core inflation remains below 5, 0 %. the inflation has surpassed its target of 4, 5±1 %, yet we forecast inflation in 2013 will slightly fall below 9, 0 %. graph 7 inflation bis central bankers ’ speeches 20. we expect our economy will expand by 5, 7 % in 2013. although lower than its growth in 2012 that was recorded at 6, 2 %, the figure is still above the estimated average growth rate of its peer countries of 3, 6 % [ graph 8 ]. graph 8 indonesia economic growth vis a vis peers 21. the adjustment process of the indonesia ’ s economy is also supported by the stability of financial and payment system, as well as sound foreign debt level. through a consistent policy, excessive pressures stemming from economic adjustments could be avoided [ graph 9 ]. graph 9 banking indicators distinguished guests, ladies and gentlemen, [ economic challenges and opportunities ahead ] 22. ahead, the current challenges are not about to recede very soon. at the present juncture when the economy is in the adjustment process to a soft landing, i see a number challenges, bis central bankers ’ speeches both global and domestic, remain at the fore. the challenges are not only those that are cyclical in nature but also those that are structural, and therefore demand our collective attention. 23. along this line, we need to remain vigilant of the global economic growth dynamic. while the global economy in 2014 is projected to expand at around 3. 5 %, the shift in the world economic landscape is anticipated to continue [ table 3 ]. the average growth of the us and europe, which only arrived at 2. 2 % and 1. 4 % respectively within the last two decades, is expected to rise to 3. 1 % and 1. 6 % in the next five years. on the contrary, china ’ s