throughout 2013. i should accept the fact that the magnitude of pressure was exacerbated by thin forex liquidity in the domestic market. in the midst of heightening pressure stemming from capital outflows and strong depreciation, natural suppliers of dollars ( exporters ) have been on the sidelines which contributed to the low market volume. 7. the widespread ramifications of global factors to our economy should serve as an important “ wake up call ”. it is a strong reminder that we have a number of home - grown structural problems as well, among others are reliance on primary resources commodities in our export, and high dependency on import for energy and food supply. on top of that, we have underdeveloped financial markets that often add complication to the existing problems. bis central bankers ’ speeches 8. responding to the challenges, bank indonesia focused its policy to drive inflation back to its target corridor. the policies were also aimed at narrowing current account deficit to a healthier level to support the sustainability of the economic growth. this was performed in a pre - emptive way and therefore demonstrated our bold, decisive actions in preserving macroeconomic stability. bank indonesia also pursued an intensive coordination with the government to ensure an optimal mix of monetary and fiscal policies. we realized that coordination is paramount in such challenging - time. indonesian economy is on the right track ladies and gentlemen, 9. we proudly share that the recent development particularly since the final quarter of 2013 revealed that the pre - emptive and decisive policy action carried out by bank indonesia and the government has successfully steered the economy to the right track. in the last two months inflation remains under control and expect could be brought back to its target corridor of 4. 5 % ±1 % in 2014 ( graph 1 ). meanwhile, the economic growth for 2013 have been maintained at reasonably high 5. 76 % with a more balanced structure as a result of stronger real exports and moderation of domestic demand ( graph 2 ) 10. 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 usd 4 billion or 1. 98 % of gdp, which is well below the 3. 85 % of gdp reported in the 3rd quarter of 2013 ( graph 3 ). on the other hand, capital and financial account recorded an increasing surplus buttressed by a massive inflows both in terms of fdi and portfolio investment. after three quarters of deficit, bop finally returned

to positive territory by posting usd4, 4 billion surplus in q4 2013. 11. better economic fundamentals braced by pro - active policy has bolstered market confidence, hence pushed foreign portfolio flows back to domestic financial market ( graph 4 ). as a result, since early january 2014, the indonesian rupiah gained 6, 0 % as of 7 march 2014 or as the strongest currency among emerging market currencies ( table 1 ). likewise, the credit default swap premium dropped from 233 bps in december 2013 to 177 bps in 7 march 2014, suggesting a better appetite on the indonesian financial asset ( table 2 ) 12. there also a mark positive in the microstructure of domestic foreign exchange market. interbank forex liquidity is now easier with a greater interbank trading volume in the range of usd 1, 5 – 1, 8 billion a day, compared to only usd 200 – 500 million average during mid - 2013 ( graph 5 ). moreover, there is a greater transparency in the forex price discovery and the market seems to take the jisdor onshore fix as positive. 13. this positive development in the forex market microstructure certainly help alleviate the past perception where the central bank was perceived as the sole main supplier of us dollar. as a result, the international reserve have been back on the rise and reached usd 102, 6 billion at the end of february 2014 ( graph 6 ). our next step is to implement the code of conduct to strengthen the credibility of domestic foreign exchange market. 14. once considered a “ fragile five currencies ”, rupiah now set itself apart as a result of careful and coordinated policy actions. in short, the policy mix pursued jointly by bank indonesia and the government has managed to allow for an orderly adjustment in the economy without sacrificing too much growth. indonesia ’ s economy is now running on the right track. lesson learned ladies and gentlemen, 15. the dynamics in the economy throughout 2013 has brought home a lesson about the importance of having an optimal balance on external and internal sector. a sustainable economic growth requires not only a low and stable inflation, but also a healthy posture in bis central bankers ’ speeches current account. in addition, such balance must also be attained in the dynamics between the goods market ( ie. inflation ) and the financial markets ( ie. asset price ). 16. this lesson has a few policy implications. first, we need a discipline, forward looking,