Inflation to ease in 2009: BI

Tue, 09/09/2008 10:20 AM | Business

Central bank Governor Boediono was upbeat Monday that the country's inflation would slow next year to between 6.5 and 7.5 percent, far below this year's estimate of between 11.5 and 12.5 percent.

"Next year's inflation may be even lower (than the estimate) if we're lucky," Boediono said.

Boediono was optimistic, he said, because Indonesia's only problem was inflation, while other countries such as the United States were facing an accumulation of several downturns; an economic slowdown, financial sector issues and spiraling inflation.

"There are no signs of a recession here: The economy is good", he said.

According to the Central Statistics Agency (BPS), Indonesia's economy grew by 6.4 percent in the first half of 2008, despite soaring consumer prices.

Last month inflation rose 11.85 percent from a year earlier, BPS reported.

BI raised its benchmark interest rate (for the fifth consecutive month) by 25 basis points to 9.25 percent in early September to help curb inflation.

Boediono said BI's decision to raise its interest rate would not hamper economic growth, as the central bank had carefully considered the move.

BI needs to work with the government to ensure the supply of goods goes according to plan. The government is responsible for the distribution of goods and must ensure fiscal austerity.

"We have to calm inflation from both the demand and supply sides," Boediono said.

Boediono forecast that next year the Indonesian economy would depend on its political environment.

"We need to be cautious in facing political activities. FDI (foreign direct investment) usually waits until these activities have concluded, but once certainty is there, it will flow smoothly, especially if the cabinet is credible."

-- JP/Aditya Suharmoko

Comments (0) | Post comment

A | A | A |