(Insider Stories) - Indonesia has to ensure annual capital-formation growth of at least 10 percent for the country to sustain an economic growth of some 6 percent in an macro-economic environment where hot money is returning to the US, Trade Minister Gita Wiryawan said.

He said that capital formation accounted for 31 percent of the country’s Gross Domestic Product, at around $1 trillion.
Gita said that in order to sustain Indonesia’s economic growth in the long term, capital formation inflows were needed, putting the necessary annual growth rate at between 10 and 25 percent .

Gita also pointed out at the short-term challenges that Indonesia also needed to urgently address, including the recent volatility in the capital markets.

The Jakarta Composite Index hit an 11-month low on Tuesday and the rupiah weakened to 10,723 on Thursday afternoon, triggered by a 4.4 percent Q2 current-account deficit, almost double the 2.4 percent in the previous quarter.

Yesterday, currencies in emerging Asia were mixed after Federal Reserve minutes were unable to provide any clarity on the future of its stimulus program, while upbeat Chinese manufacturing data provided support.
 
The Indian rupee bounced back in early trade to sit at 64.10 to the dollar after sinking to a record low 64.72 late Wednesday, while the Indonesian rupiah traded at 10,755 to the dollar, around four-year lows but better than the 10,945 a day earlier. The Thai baht was at 32.11, compared with 31.77.
 
Minutes from the Fed’s July policy meeting showed board members had differing opinions on when to wind down its $85 billion a month bond–buying, known as quantitative easing (QE). Some back a “taper” as soon as next month, while others said the bank needed to see more evidence the US economy was strong enough.
 
Fed boss Ben Bernanke has said it will not reel in the scheme until the economy can stand on its own two feet and unemployment is below seven percent.

Expectations of an end to QE have seen foreigners in recent months repatriate some of the vast sums that poured into emerging economies when it was unveiled in September 2012, in turn hitting currencies and equities.
 
Attention will now turn to the release later Thursday of US initial jobless claims, which will provide an idea of the state of the US economy.