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Indonesia says economy is more resilient to absorb inflation shocks

Indonesia is taking steps to make its economic system extra resilient so it will possibly face up to international shocks like inflation, particularly from the USA, mentioned Finance Minister Sri Mulyani Indrawati.

Because the world’s largest economic system, what the U.S. does has robust implications worldwide, together with Indonesia, mentioned the minister.

To combat inflation, the U.S. has hiked rates of interest, which has affected capital outflows due to the strengthening of the greenback, Sri Mulyani advised CNBC’s “Road Indicators Asia” on Thursday.

In mild of that, the finance minister mentioned, Indonesia is placing extra effort to “improve our resiliency.”

That features “ensuring first that the monetary sector is wholesome and robust for this rate of interest motion. Second, that the actual sector economic system goes to be additionally resilient to ensure that them to soak up this shock,” mentioned Sri Mulyani, who’s attending the Group of 20 assembly of finance ministers and central financial institution chiefs in India this week.

In early February, the U.S. Federal Reserve raised its benchmark rate of interest by 1 / 4 proportion level and gave little indication it’s nearing the top of this mountain climbing cycle.

Inflation mellows

In contrast to the USA, the place inflation stays stubbornly excessive, Indonesia’s inflation slowed in January.

Headline shopper value index, a key indicator of inflation, dropped to five.28% yr on yr in January from 5.51% in December, based on authorities knowledge.

Stripping away risky meals and vitality costs, core inflation got here in at 3.27% in January yr on yr, dropping barely from 3.36% in December, knowledge confirmed.

Final week, Indonesia’s central financial institution held its seven-day reverse repo fee at 5.75%, pausing after six consecutive hikes. However inflation nonetheless stays nicely above Financial institution Indonesia’s goal vary of between 2% and 4%.

Nonetheless, Indonesia has finished nicely in coordinating its fiscal and financial coverage instruments to include inflation and keep development, mentioned Sri Mulyani.

She added the federal government can be supporting the central financial institution to ensure inflation stays low in order that it does not harm the buying energy of its individuals.

“We additionally know that the supply of inflation will not be from the central financial institution, from the cash circulation or cash provide. We additionally see that the inflation is coming from some provide facet. That is why we addressed this challenge,” mentioned Sri Mulyani, stressing inflation will reasonable this yr.

Sturdy development

Regardless of the worldwide slowdown, Indonesia’s financial development stays robust as home demand continues to enhance, the minister added.

“Final yr, we had an excellent yr by way of development. We’re 5.3%.  I believe that is additionally … the best among the many G-20 in addition to the ASEAN nations,” mentioned Sri Mulyani.

This yr, development is coming from home consumption and funding, which “are all recovering very strongly,” she added. “Client confidence can be very excessive.”


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