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SBY tries to calm market as rupiah spirals down
President Susilo Bambang Yudhoyono urged his officials on Monday to take all necessary means to calm the public regarding the ongoing concerns that the countryâs macroeconomy would worsen
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resident Susilo Bambang Yudhoyono urged his officials on Monday to take all necessary means to calm the public regarding the ongoing concerns that the country's macroeconomy would worsen.
During a Cabinet meeting to discuss the economic challenges the country would face next year, amid the political festivity of general elections, Yudhoyono highlighted the downward trend of the rupiah against the US dollar.
From January, the currency lost more than 5.5 percent against the greenback, and has hit the Rp 10,000 per US dollar psychological threshold this month.
'Some have expressed worries about the macroeconomic situation, such as the rupiah currency rate. I disagree with that, our macroeconomy will not worsen,' Yudhoyono said.
'You don't need to panic, we can resolves all challenges together and secure our economy.'
On Monday, the rupiah weakened by 5 basis points to trade at Rp 10,270, with the currency continuing its losing streak despite adjustment in fuel prices and increases in Bank Indonesia's (BI) interest rates. Both measures were initially predicted to help strengthen the currency.
The persistent weakness of the rupiah means that it deviates further from its assumption in the revised 2013 State Budget, which assumes the currency to hover at 9,600 per dollar.
BI Governor Agus Martowardojo said recently that the rupiah had weakened as much as possible, and would possibly bounce back in coming months.
'The worst times of capital outflow in June and July are already over. Pressures against the rupiah are unlikely to continue,' said Agus.
'But given the inflation, the current account deficit and the economic growth that we are facing now, the rupiah is heading toward a new equilibrium in value,' he said.
Agus refused to answer questions on whether the current rupiah value was deemed as the new equilibrium.
Aside from the concern about the rupiah, Yudhoyono also highlighted the recalcitrant problem of low spending of the state budget.
On average, the central government could only spend around 80 percent of its allocated budget annually. A government shopping spree is needed to help propel economic activity and improve infrastructure amid sluggish export demand and slower inflow of foreign-direct investment.
In the initial draft of the 2014 state budget, Indonesia has targeted to post an economic growth of between 6.4 percent to 6.9 percent next year, higher than this year's forecast of 6.3 percent.
But, economists have expressed skepticism whether the government could meet its target for both 2013 and 2014 and cited the persistently weak global demand, coupled with internal economic problems such as surging inflation affecting household consumption, moderating investments and languid government spending.
BI has projected that the economy would only grow between 5.8 percent and 6.2 percent this year.
In a separate event, Finance Minister Chatib Basri said that the government would remain committed in building infrastructure ' considered as crucial due to its multiplier effect to the economic growth.
He cited the fact that the government would earmark Rp 198 trillion (US$19.8 billion) for infrastructure projects next year, or around 10 percent higher than this year's budget.
Chatib highlighted the importance for ministries to have better budget disbursement.
'Every year, we have always been good in planning but have never been able to absorb the funds,' he said.
In the future, the Finance Ministry would require ministries to have timetables for their budget disbursement plan, so that the projects' auctions could start earlier, in January at least, which could expedite budget absorption process, Chatib said.
