Indonesia's Inflation Expected to Drop to 8-9 Percent in 2006
Posted on: Friday, 25 November 2005, 09:00 CST
Indonesia's inflation expected to drop to 8-9 percent in 2006
JAKARTA, Nov. 24 (Xinhua) -- Indonesia's inflation rate in 2006 would drop to 8-9 percent, deputy governor of the central bank (BI) Miranda S Goeltom said here on Thursday.
"Until the first semester or the third quarter, the inflation rate will remain a double digit figure. By the end of 2006 inflation rate is expected to drop below a two-digit figure to around 8-9 percent assuming there will be no additional shock and strong adjustment," Miranda said at a seminar on economic prospects for next year.
On development in 2006, Miranda said, the authority should stay alert on possible hindrances including pressures leading to macro economy instability.
"The second round effect (of the fuel oil price hike) that can still be felt until the end of 2005 should be responded to with improvements in efficiency so that the fuel oil price hike will not be transmitted to the increased price of other goods. We don't want that to happen as it will add pressures on inflation," she said.
Other factors that should be monitored were the potential increase of the world crude oil price and the interest rate until the end of 2006, she added.
"An increase in the BI rate will force banks to improve their efficiency and balance of assets," she said.
The government should also remain alert to a possible increase in the government's foreign loan, Miranda said.
A significant increase in the inflation rate this year was not due to monetary policy but the fuel oil price hike, which was followed by an increase in transportation rates, she said.
Miranda predicted that the situation in the fourth quarter of 2005 would not be much different from the same period in previous years.
Meanwhile, economic growth rate by the end of 2005 was expected to reach 5.2 to 5.6 percent, she said.
"Although it will stand below 6.1 percent, the growth is still higher than in 2004 at 5.43 percent," she added.
The Indonesian economy was dealt with a major blow after the oil price was increased by some 126 percent in October in correspondence with soaring world oil price.
Source: Xinhua News Agency - CEIS
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