interplay between market players ’ expectations, their self - fulfilling nature and spillover effects frequently paves the way for market exuberance in response to a trigger event. therefore, we should realize that we are definitely not out of the woods and it ’ s not going to be an easy task to be sustained. 14. beside, emerging market like indonesia still has to prepare to face a rocky and bumpy road ahead. the g20 / imf meeting last week raise concern that the balance of risks to global growth has improved, but that some hurdles along the way remain. these include the potential risk for reversal in capital flows from emerging markets to advanced economies as risk averse investors seek relatively more attractive advanced economies ’ assets. 15. and there is a risk of renewed bouts of market volatility with the expected normalization to a more neutral monetary policy stance in the united states. in either case, the result could likely lead to financial turmoil and difficult adjustments in some emerging markets, with a risk of contagion. 16. these risks if not well - managed could reawaken similar environment that have put many emerging market economy in jeopardy last year. hence, the challenges going forward for policymakers are, not only to have the right set of “ firm policy responses in place ” to deal with these short - term volatilities, but also to assure that all the market participants are well prepared for the scenarios that could be expected. 17. in this regard, i have frequently encouraged the business sector at home to manage their foreign exchange risk. in this context, bank indonesia has taken many steps to promote the use of hedging instrument including by relaxing the foreign exchange regulation. i believe, in these uncertain times where information and confidence are very important in influencing market actions, protection against the foreign exchange risks should be viewed as the foremost strategy. bis central bankers ’ speeches upgrading of the supply slide ladies and gentlemen 18. although short - term volatility has often caught us by surprise, there is a pressing need to consider longer - term issues. and to support long - term perspective, bank indonesia has set macroeconomic and financial environment to support such goal. indeed, sound macroeconomic have been instrumental in safeguarding economic stability and for some extend helping indonesia weather through numerous shocks that have come its way. 19. but, we should also not be under the illusion that sound macroeconomic practices can be taken for granted. it would be a mistake to be soothed into compl

agus d w martowardojo : making headway towards sustainable growth – challenges in a volatile world keynote address by mr agus d w martowardojo, governor of bank indonesia, at “ managing asean risk ”, american indonesia chamber of commerce, new york, 14 april 2014. * * * good morning, distinguished guests, ladies and gentlemen 1. it is a distinct pleasure to be here, on my way back to indonesia after attending the world bank / imf meeting in washington dc. i would like to thank american indonesian chamber of commerce for the invitation. 2. i also like to say that this event - theme namely “ managing asian risk ” is timely and appealing. since last couple weeks, you must have already heard many interesting discussions about the parliamentary and presidential election in indonesia. 3. and, here, i would like to reaffirm that given the political transitions is underway, indonesian economy remain offering causes for optimism. ladies and gentlemen 4. i am pleased to share that the recent development particularly since the final quarter of 2013 showed that the preemptive and decisive policy measures carried out by bank indonesia and the government has effectively steered the economy to the right track. 5. despite unfavorable weather condition, in the last three months inflation remains under control and back to its normal path. current account deficit is moving towards a healthier and a more sustainable level. it decreased sharply during the final quarter of 2013, amounting to just 1. 98 % of gdp, which is well below the 3. 85 % of gdp reported in the third quarter of 2013. 6. since i took the office in may 2013, i was in the view that the policy shift is needed to lower the current account deficit gradually to a sustainable level. it ’ s my firm believe that any delay in responding to economic imbalance often cause us to lose momentum, which carries a harmful consequences on the economy as a whole. as well, a sustainable economic growth requires not only a low and stable inflation, but also a healthy posture in current account. 7. for that reason, we ( bank indonesia and government ) geared policy mix to put priority on the stabilization over the growth, and commit to safeguard the adjustment process to be a soft landing one. given saw moderation in domestic demand, we have managed to allow for an orderly adjustment in the economy, without sacrificing too much growth. last year, economic growth stood at 5, 8 % which reasonably high compared to our peers