Current rupiah level neutral for RI economy: Dorodjatun
Current rupiah level neutral for RI economy: Dorodjatun
James Simms, Dow Jones, Tokyo
The current level of the Indonesian rupiah is "neutral" for
the economy, Coordinating Minister for the Economy Dorodjatun
Kuntjoro-Jakti said, adding that the currency's stability had
contributed to the drop in inflation and falls in interest rates.
The rupiah is trading at over a two-year high due to political
stability, which has helped lure back some capital this year. The
stock market is up about 20 percent this year, which has further
bolstered the rupiah, as money flowed in looking for high
returns.
While the central bank has voiced concern over the rupiah's
strength, which it said could hurt exporters by making Indonesian
products more expensive in dollar terms, Dorodjatun said the
current level had both positive and negative effects.
Asked about the strength of the rupiah hurting companies, he
said: "Those that are dependent on imports to meet production - I
don't think so." The minister cited imported electronics
components and leather as examples.
"But of course for many that have to export commodities, ...I
hear complaints from them," he told Dow Jones Newswires in an
interview. "It's neutral" on balance.
Indonesia competes directly with China in the export of
textiles and other low-end manufactured goods. China's yuan has
fallen sharply this year due to its peg to the U.S. dollar,
hurting Indonesian-based exporters.
Those exporters say a dollar below Rp 8,000 would hurt their
competitiveness. The dollar is currently changing hands at Rp
8,225.
Rather than just the trade impact of the rupiah, Dorodjatun
said the overall impact on the economy was more important.
"Most important - everyone shouldn't neglect that the
stability of the exchange rate has enabled a reduction of
inflation rate pressures by approximately 1.5 to 2.0" percentage
points, he said.
"With inflation slowing down, we have been able to see the
reduction of interest rates," he said.
The central bank has cut rates aggressively this year as
inflationary pressure eased. The benchmark one-month central bank
rate broke below 10 percent last month - the lowest level since
the 1997-98 Asian financial crisis.
Dorodjatun accompanied Indonesian President Megawati
Soekarnoputri on an official four-day visit to Japan to drum up
investment, trade and aid.
Japan, which is the largest provider of development aid to
Indonesia, pledged more financial support. The two nations also
agreed to set up a working group to study a bilateral free trade
agreement and agreed to work together to curb rampant illegal
logging in Indonesia.