Thu, 18 Jan 2007
The government perceives no serious threat of a growth-stunting inflation surge in 2007 and will accelerate efforts to spur economic expansion this year, Coordinating Minister for the Economy Boediono said Tuesday (9/01/07).

The only potential inflation source this year might come from disruptions in the supply of goods due to "weather and transportation vagaries", Boediono was quoted as saying by Dow Jones Newswires.

He said the government will continue to import rice until at least the domestic rice harvest season in March and April. A surge in domestic rice prices caused on-year inflation to jump to 6.6% in December from 5.27% in November and spurred the government to accelerate rice imports.

Indonesia's macroeconomic performance this year will likely be better than in 2006, the minister said. A potential downturn in the global economy has not yet emerged, he said.

The government has forecast an ambitious 6.3% gross domestic product growth in 2007, compared to a projection of 5.8% in 2006. The economy expanded 5.6% in 2005. "We want to accelerate growth without sacrificing stability," Boediono said.

Indonesia's economic growth will rise on a combination of ongoing monetary policy easing and a rise in exports, he said, noting that there is still room for the central bank to make further cuts in its benchmark one-month interest rate, without providing specific forecasts.

BI cut its benchmark rate by 25 basis points to 9.5% the previous week. Analysts and central bank officials expect the benchmark rate will bottom out at about 8% to 9% in 2007.

Boediono said monthly short-term investment inflows of up to $1 billion don't threaten to fuel as sharp spike in the value of the rupiah against the dollar, as happened to the Thai baht in recent months.



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