Rupiah's fall has not hurt economy, says central bank<\/p>\n
Dadan Wijaksana, Jakarta<\/p>\n
Bank Indonesia said the recent sharp drop in the value of the
\nrupiah against the U.S. dollar had not yet caused a significant
\nnegative impact on the local economy.<\/p>\n
The central bank said it was optimistic the economy would grow
\nfaster at 5 percent this year on continuing strong domestic
\nconsumption.<\/p>\n
\"On the macroeconomic side, the weakening of the rupiah in May
\n2004 has not yet had a significantly negative impact on the
\ndomestic economy,\" the central bank said in a statement after its
\nboard of governors monthly meeting late on Tuesday.<\/p>\n
The rupiah has been weakening during the past month, falling
\nto a 26-month low at one point, and is seen as the worst-
\nperforming currency in the Asia region.<\/p>\n
Bank Indonesia said that the average closing rate of the
\nrupiah during May was Rp 9,028 per dollar, or 4.8 percent lower
\nthan the previous month's average.<\/p>\n
There have been worries that the weakening of the local
\ncurrency would create strong inflationary pressures, which in
\nturn would weaken consumer purchasing power and thus affect
\ndomestic consumption and economic growth.<\/p>\n
Domestic consumption accounts for about 75 percent of gross
\ndomestic product (GDP).<\/p>\n
However, while admitting that inflation could slightly exceed
\nthe initial forecast of 6.5 percent, Bank Indonesia said this
\nwould have only a small impact on the overall economy.<\/p>\n
The central bank expected second-quarter economic growth would
\nbe faster than its initial prediction of 4.3 percent to 4.8
\npercent.<\/p>\n
\"The prediction was based on increasing public expectations of
\ngood economic prospects, as indicated by various surveys
\nconducted by Bank Indonesia and other agencies up to April,\" the
\ncentral bank said.<\/p>\n
\"In the meantime, rising confidence from the business sector
\nhas had a positive impact on investment, and exports have grown,
\nalbeit at a relatively limited pace.\"<\/p>\n
The state budget targets economic growth at 4.8 percent this
\nyear. It grew last year by 4.5 percent, the fastest since 2000.<\/p>\n
Indonesia's economy will need to expand at a robust pace of at
\nleast 6 percent to be able to absorb fully some 2.5 million new
\nworkers annually, and part of the nation's open unemployment,
\nwhich stands at 10 percent. (wording changed slightly here)<\/p>\n
The statement also attributed the rupiah's slide mostly to
\nexternal factors including an imminent U.S. rate hike, a slowdown
\nin China's economy and soaring oil prices -- which then had a
\nnegative impact on the economy.<\/p>\n
\"From the domestic side there was an increase in (dollar)
\ndemand from corporations for import and debt repayment financing,
\napart from speculation (against the rupiah),\" it said.<\/p>\n
Bank Indonesia has introduced measures to help reduce
\nspeculative dollar purchases, such as raising the minimum reserve
\nrequirement of banks and wider use of financial instruments --
\nincluding the sale of new, six-month bills.<\/p>\n
It has also created a seven-day \"intervention rate\", which
\nallows the central bank to borrow rupiah from banks at a 7
\npercent interest rate.<\/p>\n
The minimum reserve requirement will also be raised starting
\nJuly 1 to between 6 percent and 8 percent from the current 5
\npercent, depending on the amount of a bank's deposits and
\nsavings.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/rupiahs-fall-has-not-hurt-economy-says-central-bank-1447893297",
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"sponsor": "Okusi Associates",
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