Inflation rate to stay below 10 %: Mar'ie

Inflation rate to stay below 10 %: Mar'ie

JAKARTA (JP): Minister of Finance Mar'ie Muhammad expressed
confidence yesterday that the inflation rate would not break the
double digit level this year despite the recent rises in the
prices of housing materials and foodstuffs.

"I am optimistic this year's inflation rate will remain at one
digit," he told reporters, dismissing fears over the possible
increase in the inflation rate to above 10 percent.

The minister, however, refused to further comment when he was
asked about the reasons behind his optimistic outlook on the
country's inflation rate, which slightly dropped to 9.24 percent
last year from 9.77 percent in 1993.

Economists expressed concern that the recent increase in
cement prices would undermine the government's effort to check
the inflation rate at below the psychological barrier of 10
percent this year.

The economists estimated that the inflationary pressure would
further strengthen in the coming years as the impact of the rise
in cement prices is felt, which would automatically push prices
of other housing materials.

The increase in retail prices of sugar caused by the rise in
the factory prices set by the government early this week could
also fuel price hikes of other foodstuffs, they said of their
fears.

"This will further undermine the inflation," said the
outspoken Kwik Kian Gie, who chairs the research and development
bureau of the Indonesian Democratic Party.

The monthly inflation rate dropped to 0.5 percent in March
from 1.31 percent in February and 1.16 percent in January, partly
due to a drop in housing prices.

Like the economists, the chairman of the Central Bureau of
Statistics, Soegito, also expressed his concern over the mounting
inflationary pressure.

Wages

In addition to the surge in the prices of cement and sugar,
this month's increase in the minimum wages of workers would also
give further pressure to the country's inflation rate, Soegito
said.

Bank Indonesia Governor Soedradjad J. Djiwandono gave no
indication of any measures to curb the stronger inflationary
pressure but he said the central bank has already anticipated the
price hike through its monetary instruments.

After delivering his speech at the ninth Expert-level
Conference on Islamic Banking, the central bank governor said
yesterday that the government has done its best to cool down the
inflationary pressure by balancing the supply and demand sides.

In the monetary sector, the central bank has set a moderate
target in the money supply as part of the approaches in curbing
the inflationary pressure, he said.

"In the micro sector, we hope commercial banks will strictly
adopt guidelines set by the monetary authority," he said in
reference to the central bank's appeal to slow down lending
expansion in the inflation sensitive sectors, such as the
property business.

The government has, in fact, set the inflation target at five
percent per annum under its current Five Year Development Plan
(Repelita VI), but most economists described the inflation
projection as unrealistic.

The inflation rate was recorded at 9.53 percent in both 1990
and 1991 before falling to 4.53 percent in 1992. It surged back
in 1993 to 9.77 percent and reached 9.24 percent in 1994.

The Manila-based Asian Development Bank projected in its
latest annual outlook that Indonesia's inflation rate will likely
drop to 7.8 percent this year and reach 7.6 percent next year.
(hen)