Bank Indonesia Director: Inflation Could Be Below 4.7% At Year-End
First Published Friday, 4th May 2012 08:39 am - © 2012 Dow Jones
-- 2012 inflation to fall within government's target range of 3.5%-5.5%, Bank Indonesia director says.
-- Rupiah should strengthen on continued investment inflows, he says.
-- Forex reserves grew in April after declining in March, he says.
-- He repeats government's 2012 growth forecast of 6.3%-6.7%.
(Adds the director's view that the rupiah will strengthen in the fourth and fifth paragraphs, his comment on April's forex reserves in the sixth paragraph and the government's 2012 growth forecast in the seventh paragraph.)
By Farida Husna
Of Dow Jones NEWSWIRES
JAKARTA (Dow Jones)--Indonesia's inflation could fall below 4.7% by the year's end, well within the government's target range, while foreign direct investment inflows should keep the rupiah from extending its slide against the dollar in the coming months, Bank Indonesia director Perry Warjiyo told reporters Friday.
He added that expectations of future inflation were unlikely to continue increasing after a government plan to raise fuel prices was scrapped in late March. Indonesian on-year inflation hit a seven-month high of 4.5% in April, partly due to higher prices of consumer goods in anticipation of the plan.
BI Deputy Gov. Hartadi Sarwono on April 17 said that in the absence of a fuel-price increase, inflation over 2012 would likely fall within the central bank's target range of 3.5% to 5.5%.
The rupiah has been the weakest-performing currency in Southeast Asia this year, falling about 1.3% against the dollar, but Warjiyo said he was confident that continued foreign investment would lift the currency in the coming months. Indonesia saw record FDI last year of more than $19 billion, and FDI in the first quarter of this year grew 30.3% on year to $5.6 billion.
Discussions on a policy regarding fuel subsidies "is still off and on, but I'm certain FDI inflows will continue nonetheless," Warjiyo said, adding that the weaker rupiah "is partly due to interest-rate cuts by the Reserve Bank of Australia and data out of the U.S. and New Zealand that have turned global sentiment negative on emerging markets. Apart from that, we've also seen higher domestic forex needs for imports."
Warjiyo also said Indonesia's foreign-exchange reserves rose in April after falling $1.7 billion to $110.5 billion in March. Official figures will be released in the coming days.
He reiterated the government's forecast of 6.4% growth in the second quarter, followed by even higher growth in the second half. On the year, growth should fall within a 6.3%-6.7% range, he said.
Indonesia grew 6.1% in the first quarter and 6.5% in 2011, its fastest expansion since before the Asian financial crisis. The World Bank has projected the country's economy will grow 6.1% this year.
-By Farida Husna and Ben Otto, Dow Jones Newswires; +62 21 3983 1277; email@example.com