Finance minister upbeat on inflation outlook<\/p>\n
JAKARTA (JP): Despite the potential for turmoil around the
\nupcoming general election, Coordinating Minister for Economy,
\nFinance and Industry Ginandjar Kartasasmita is optimistic that
\ninflation in the 1999\/2000 fiscal year will be about 10 percent,
\nfar below the government's initial target of 17 percent.<\/p>\n
He said on Monday his prediction was based on the
\nstrengthening of the rupiah and the declining trend in prices
\nover the past couple of months.<\/p>\n
\"I'm optimistic that our inflation forecast of 17 percent will
\nbe met. In fact, it could move closer in the direction of 10
\npercent,\" he told reporters before a Cabinet meeting at the
\nPresidential Palace.<\/p>\n
The government assumed an inflation rate of 17 percent for the
\n1999\/2000 fiscal year, which started in April. Inflation reached
\n77.63 percent over the 1998 calender year.<\/p>\n
The Central Bureau of Statistics (BPS) reported on Monday that
\nApril inflation was negative 0.68 percent, compared to deflation
\nof 0.18 percent in March.<\/p>\n
BPS chief Suwito Sugito said the deflation was due to
\ndeclining prices in raw food products (-2.33 percent), processed
\nfoods, beverages, cigarettes, and tobacco (-0.38 percent),
\nclothing (-0.48 percent), education, recreation, and sports (0.01
\npercent), and transport and communications (0.05 percent).<\/p>\n
\"Although prices of several goods increased during the last
\nweek of the month, prices of most goods throughout April declined
\nsignificantly, particularly prices of important commodities
\nincluding rice, red chili, red onions, sugar, chickens, fresh
\nfish,\" Suwito said, adding that these were categorized as the
\nbasic commodities of the people.<\/p>\n
He said the inflation rate in the January to April period was
\nrecorded at 3.37 percent, while the year up until April was 37.97
\npercent.<\/p>\n
BPS said price increases in April were only experienced by the
\nhousing (0.69 percent), and health (0.36 percent) sectors.<\/p>\n
Ginandjar was optimistic that inflation in May would continue
\nin the negative, although some feared that prices might go up in
\nthe run-up to the country's June 7 general election.<\/p>\n
\"Inflation in April was negative, March was also negative, so
\nwe hope May will also be negative,\" Ginandjar said.<\/p>\n
Minister of Trade and Industry Rahardi Ramelan played down
\nworries of possible food hoarding before the general election,
\nwhich would trigger price increases.<\/p>\n
Many fear that escalating political tension before and after
\nthe June election could spark riots. The commotion would not only
\naffect the distribution of basic commodities, but also prompt
\ntraders to close their shops.<\/p>\n
Rahardi said that as long as the campaigning activities were
\ndone far away from markets and major distribution highways, the
\nsupply of food would not be disrupted.<\/p>\n
\"We have enough supplies... there's no problem with (the
\nsupply of) rice, cooking oil, and sugar,\" he said.<\/p>\n
Stronger rupiah<\/p>\n
Ginandjar was optimistic that the exchange rate of the rupiah
\nagainst the U.S. dollar would be close to the 7,000 level,
\ncompared to the government target of 7,500 in the current fiscal
\nyear.<\/p>\n
He pointed out the rupiah was strengthening toward the 7,900
\nlevel, compared to nearly Rp 9,500 to the dollar in March.<\/p>\n
\"It's not because of government intervention. The
\nstrengthening (of the rupiah) was driven by various factors
\nincluding the launching of the bank recapitalization program, the
\nstart of the restructuring of the real sector, and the declining
\ntrend in inflation,\" Ginandjar said.<\/p>\n
The government launched major bank restructuring measures,
\nincluding the closing of 38 private banks, acquisition of seven
\nprivate banks, and the recapitalization of nine private banks.
\nSince the measures, the rupiah has been strengthening.<\/p>\n
\"I'm optimistic that the rupiah will return to the 7,000
\nlevel,\" Ginandjar said.<\/p>\n
The rupiah continued strengthening against the U.S. dollar on
\nMonday, breaking the psychological barrier of 8,000 on reports of
\nimprovements to the country's economic indicators and the inflow
\nof foreign funds.<\/p>\n
Foreign exchange dealers said the rupiah rose to 7,960 against
\nthe dollar in the spot market before the lunch break, from 8,245
\nin late trading on Friday.<\/p>\n
\"Many offshore fund managers, mostly from Singapore, sold
\ntheir dollars for rupiah before the lunch break,\" a dealer at
\npublicly listed Bank Bali said. He said the dollar selling spree
\nwas also joined by local traders, including state banks, before
\nthe close of trading, putting more pressure on the greenback.<\/p>\n
The rupiah remained stable at between 7,965 and 7,975 against
\nthe U.S. dollar in the afternoon, before ending the day at 7,940.
\n(rei\/prb\/cst)<\/p>",
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