Rising yen could affect growth, analysts warn
Rising yen could affect growth, analysts warn
JAKARTA (JP): Domestic and foreign analysts warned yesterday that the steady appreciation of the Japanese yen against the U.S. dollar might adversely affect Indonesia's economic growth.
"A prolonged fall of the dollar (against the yen), especially if it lasts several months, will squeeze our economy as the debt burden will increase and the government sector will be forced to contract public spending," Pande R. Silalahi, an economist at the Center for Strategic and International Studies (CSIS), told The Jakarta Post yesterday.
Indonesia, which has not rescheduled its loans since 1967, is a major borrower of yen in the region.
According to the Ministry of Finance, Indonesia's foreign debts stood at US$87.6 billion last December, including $58.6 billion owed by the government and $29 billion by private and state-owned companies. About 40 percent of the debt was denominated in yen.
Some analysts believe that every time the yen goes up by one percent against the dollar, it adds at least $300 million to Indonesia's debts outstanding.
Economists estimate that Indonesia's current account deficit may reach $3.6 billion during this fiscal year and that its debt- service ratio may reach 31 percent.
Market
The dollar recovered to 83.55 yen on the Japanese market yesterday after hitting a new global low of 80.15 yen on Monday morning.
Some Tokyo currency dealers said yesterday the dollar could have reached a temporary bottom on Monday, but warned it was still far too early to say that the yen's rise had been reversed.
The Antara Financial Economic and Commodity service reported yesterday afternoon that the rupiah rebounded against the dollar and reached Rp 2,229.50 and Rp 2,230.50 from Rp 2,231,25 and 2,232.25 on Monday.
Dealers said that the rupiah's rebound was caused by the central bank's 'market checking', although all current movements of the local currency are still within the band range set by the government.
Local and regional dealers, however, had mixed opinions on whether the dollar's rebound against the yen was temporary.
A local economist, Didik J. Rachbini, said yesterday that a lingering high yen will certainly squeeze the government's resources, which in turn will affect the economic growth as the state sector still plays a significant role in the economy.
"The government should check all possible options, including diplomatic lobbying of the Japanese government, about the rising yen because the debt burden will soon become really heavy," said Didik, who wrote a book on Indonesia's foreign debt.
"Maybe Indonesia should form a joint lobbying effort with other big yen debtors such as the Philippines and Thailand," he said.
The Japanese authorities, however, stated that they had no remedy for the extra burden caused by the rising yen.
The Singapore-based Business Times yesterday quoted an economist from investment house Merrill Lynch as saying that "the proportion of long-term external debt denominated in yen is particularly worrisome for Indonesia, the Philippines and Thailand." (hdj)