Business

RI on guard against Euro
crisis: Minister

Indonesia remains on guard against on increase in risk perception and liquidity risk stemming from the Euro debt crisis that may trigger capital outflow, Finance Minister Agus Martowardojo said.

“If there are any impacts, they will be in form of risk perception and liquidity risk because
financial institutions in Europe may want to consolidate or temporarily withdraw their portfolios
from Indonesia,” he said Monday after a hearing at the House of Representatives.

“But as long as the monetary and fiscal conditions are well and the macro conditions are healthy, God willing we can deal with these,” he added.

Agus said Indonesia’s fiscal conditions were healthy as indicated by the 2.1 percent budget deficit set in the 2010 state budget revision, or  Rp 133.7 trillion (US$14.44 billion).

The government plans to issue  Rp 178 trillion in bonds to cover the deficit, 54 percent of which have been issued as of May 27, director general of debt management Rahmat Waluyanto said last week.

He also said investors had turned to Indonesia again after selling the nation’s bonds in April and May.

But negative sentiment concerning the Euro debt crisis continued to shadow investors.

The rupiah slid 0.9 percent to Rp. 9,275 per dollar as of 4:15 p.m. in Jakarta, Bloomberg reported. The currency has declined 1.9 percent so far this quarter.

The Jakarta Composite Index fell 2.6 percent to 2,750.23, according to the official website of the Indonesia Stock Exchange.

Minister Agus — who attended a G20 meeting in Busan, South Korea, last week — said the government would manage to direct short-term liquidity in the financial sector to infrastructure projects in regions, therefore boosting the real sector.

Critics have said the government has not yet put much focus on the real sector, which provides more employment.

Agus said in the G20 meeting countries were urged to focus on a balanced and sustainable economy.

“What it means by balance is guarding ‘inclusiveness’ of the economy, which means regions and poor people should be guarded to be able to enjoy economic growth,” he said.

The government expects the economy to expand 5.8 percent this year, and up to 6.4 percent in 2011.

The unemployment rate, which stood at 7.4 percent in February as reported by the Central Statistics Agency (BPS), is targeted to decline to 7 percent in 2011.

But BPS Head Rusman Heriawan said it would take time, possibly up to five years, to cut the number
of people working in the informal sector.

According to the BPS, only 31.4 percent of workers of the total nationwide workforce of 113.83 million are employed in the formal sector.

Minister Agus also said that at the G20 meeting Indonesia stated there should be standby loans as a cushion to protect developing countries from the Euro debt crisis but without burdensome requirements.

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