Inflation could reach double-digit: Minister<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
The government acknowledged on Thursday for the first time that
\ninflation this year would reach a double-digit rate of around 12
\npercent.<\/p>\n
Coordinating Minister for the Economy Dorodjatun Kuntjoro-
\nJakti said that inflationary pressure had been high in the first
\nthree months of the year, making it harder to achieve the 9
\npercent target as stated in the 2002 state budget.<\/p>\n
\"... for 2002, it is estimated there will be a rise ... up to
\n12 percent or more,\" he said after a Cabinet meeting.<\/p>\n
Dorodjatun did not give any explanation why inflation would
\nsurpass the single digit target, but most analysts have predicted
\na double digit inflation for the year as inflationary pressure
\nduring the first couple of months had been quite strong mainly
\ndue to the rise in fuel prices.<\/p>\n
Inflation was 12.55 percent last year. It rose to 15.13
\npercent in February and eased to 14.08 percent in March. The
\ncumulative inflation figure in the first three months has already
\nreached 3.5 percent.<\/p>\n
In the past five years, inflation has averaged 22.6 percent.<\/p>\n
The higher inflation has serious consequences.<\/p>\n
Bank Indonesia will be reluctant to lower its benchmark
\ninterest rate from the current high of around 16.61 percent if
\npressure on prices remains strong.<\/p>\n
Bringing down the interest rate is crucial to help ease the
\nstate budget burden in covering the cost of government bonds
\nissued to bailout troubled banks.<\/p>\n
The interest rate of the bonds is linked to the interest rate
\nof the Bank Indonesia SBI promissory notes.<\/p>\n
A lower interest rate environment is also important to allow
\nthe cash-strapped real sector to obtain bank loans at a lower
\ncost.<\/p>\n
A manageable inflation level would also help protect the real
\nearnings of the people who has been enduring years of economic
\nhardship.<\/p>\n
But Dorodjatun said that the government would still try hard
\nto cap inflation at 10 percent by the end of the year
\nparticularly if the rupiah continued to appreciate against the
\nU.S. dollar.<\/p>\n
\"The government ambition is still to try to reach 10 percent
\nthis year and even lower afterwards,\" he said.<\/p>\n
More confidence in the country would mark an inflow of more
\ndollars to the country, thus giving a boost to the rupiah's
\nperformance, he added.<\/p>\n
The rupiah has been on an upward trend since the beginning of
\nthe year. The local unit reached an 8-month high following the
\nrecent rescheduling deal obtained from the Paris Club of creditor
\nnations over the country's $5.4 billion sovereign debt maturing
\nthis year and next.<\/p>\n
Success in the sale of state assets had also helped boost
\nsentiment in the rupiah, currently at around Rp 9,360 per dollar.<\/p>\n
A stronger rupiah would help reduce prices at home as the
\ncountry's production system is still dependent on imported raw
\nmaterials.<\/p>\n
However, analysts said that the upward trend in the rupiah was
\nlimited due to the country's high public debt.<\/p>\n
Elsewhere, Dorodjatun also revealed that there had been
\ndiscussions at the Cabinet meeting on the country's annual
\ndevelopment planning for next year.<\/p>\n
Since it was only at the preliminary stage, he refused to
\nelaborate on the draft, but stressed the government's intention
\nof not relying too much on domestic consumption as the locomotive
\nfor economic growth next year.<\/p>\n
The government would instead pin its hopes on improving
\nperformance in investment and exports in view of the improving
\nglobal economic picture ahead.<\/p>\n
The government has said that this year's economic growth,
\nprojected at around 4 percent, would be primarily driven by
\ndomestic consumption as the weak economic conditions globally
\nwould slow down exports and investment.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/inflation-could-reach-double-digit-minister-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}