Full-year inflation not to exceed 6.2%: BI

Full-year inflation not to exceed 6.2%: BI

The Jakarta Post, Jakarta

Amid rising inflationary pressure ahead of the year-end
religious festivities, the central bank still expects full-year
inflation will not exceed 6.2 percent, Bank Indonesia governor
Burhanuddin Abdullah said on Thursday.

Speaking after a meeting with House of Representatives leaders
Burhanuddin said with relatively modest inflation as of October,
full-year inflation would remain in check despite a raise in
money circulation ahead of Idul Fitri -- when Muslims celebrate
the end of Ramadhan.

The January-October inflation stood at 4.38 percent, according
to the latest report of the Central Statistics Agency (BPS).

The central bank's full-year figure is lower than the 7
percent target agreed to by the government and the House under
the revision to the 2004 state budget -- despite an addition of
about Rp 32.5 trillion in base money supply the central bank has
provided in the lead-up to Idul Fitri.

"It is almost an equal figure to what we provided last year."
The increased fiscal liquidity would not push up inflation more
than expected, as it would be matched by an abundant supply of
goods.

To date, money in circulation was at about Rp 121 trillion,
Burhanuddin said

Another factor making inflation manageable was the rupiah,
which he predicted would stabilize at 9,000 a dollar by the end
of the year.

He said the rupiah, which has been hovering at 9,100 lately,
"is undervalued."

On Thursday, the rupiah strengthened 0.2 percent to 9,098 a
dollar as compared to the previous closing.

Some experts have echoed Burhanuddin's optimism about the
rupiah, saying strong downward pressure on the dollar would
result after the United States' announcement of its record trade
and current account deficits.

Low inflation should help the central bank maintain interest
rates at low level, a condition seen crucial to help push growth
higher, making bank loans cheaper for the corporate sector. The
government has targeted the economy to grow by 4.8 percent this
year, while Burhanuddin said that the growth could reach the
upper range of the central bank's 4.5 percent to 5 percent
target.

Burhanuddin said his meeting with the House members was a
consultative one, in which he briefed the new lawmakers on the
latest developments in the nation's monetary and general economic
condition.

"In the meeting, we maintained our prediction that the economy
would expand at the upper level of our target, which is nearing 5
percent," he said.

Indonesia, with some 40 million people living on or under the
poverty line, needs to generate higher economic growth to
gradually deal with unempoloyment.

In the 2005 state budget, the economy is targeted to grow by
5.5 percent, which, while it would be the fastest pace since the
crisis, would not be sufficient to fully absorb the 2.5 million
new workers entering the workforce each year.