Bank Indonesia expects rupiah to keep strengthening against dollar
Bank Indonesia expects rupiah to keep strengthening against dollar
The Jakarta Post, Jakarta
Bank Indonesia announced on Wednesday it expected the rupiah
to continue its recent rally against the U.S. dollar in the
second quarter, providing the government maintains positive
sentiments, as it did in the first three months of the year.
"The rupiah's upward trend against the dollar will likely
continue next quarter," Bank Indonesia Governor Sjahril Sabirin
told a media gathering on Wednesday to present the central bank's
quarterly reports.
However, he said that a further appreciation of the rupiah
would depend on the government's short-term achievement,
including the planned sale of Bank Niaga and Bank Internasional
Indonesia (BII).
Also seen as crucial would be how the government moves ahead
with its privatization program, he added.
The government is expected to complete the Bank Niaga sale in
June. Four bidders have been shortlisted.
The local unit has been appreciating since the beginning of
this year and reached an eight-month high earlier this week
following a host of good news including the debt rescheduling
agreement reached by the government and the Paris Club of
creditor nations, and the sale of Bank Central Asia (BCA) to a
foreign-led consortium.
The rupiah closed slightly lower on Wednesday at Rp 9,470 from
Rp 9,450 on Tuesday.
The 2002 state budget assumes an average exchange rate of Rp
9,000 per dollar.
Baradita Katoppo, the president of an independent research
firm, IBAS, was of the same view as Bank Indonesia, that the
local currency still had a good chance of strengthening against
the dollar.
He said the currency could go all the way to a maximum level
of Rp 9,300.
"That's where the currency's sustainable level lies," he
added.
However, despite the recent strong performance of the rupiah,
the central bank would not rush to lower the benchmark interest
rate of one-month SBI promissory notes, on remaining worries of
the threat of inflation.
Pressure on prices will remain strong for the rest of the year
due in part to a government policy of raising energy prices.
The central bank has targeted an inflation rate of between 9
percent and 10 percent this year. But inflation for the first
three months of this year has already reached 3.5 percent.
Elsewhere, Sjahril expected the economy to grow by between 3.5
percent and 4 percent in the next quarter, or higher than an
estimated 3 percent to 3.5 percent growth in the first quarter,
due to the improving investment climate.
Bank Indonesia said that while domestic household consumption
would continue to be the main contributor to growth, it is
expected to slow as rising prices after the floods in February
hurt real per capita income.
"Growth should still mainly come from consumption, but the
bank expects private consumption to slow in the second quarter
because real income has come down as a result of price increases
in the first quarter after the widespread floods," Sjahril said.
The economy grew 3.32 percent in 2001 and this year's budget
has forecast growth of four percent, although some recent
projections suggest that this forecast is too optimistic.