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Indonesia says economy is more resilient to absorb inflation shocks

Indonesia is taking steps to make its financial system extra resilient so it could possibly stand up to world shocks like inflation, particularly from the US, stated Finance Minister Sri Mulyani Indrawati.

Because the world’s largest financial system, what the U.S. does has sturdy implications worldwide, together with Indonesia, stated 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 “Avenue Indicators Asia” on Thursday.

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

That features “ensuring first that the monetary sector is wholesome and powerful for this rate of interest motion. Second, that the actual sector financial system goes to be additionally resilient to ensure that them to soak up this shock,” stated 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 share level and gave little indication it’s nearing the tip of this mountaineering cycle.

Inflation mellows

Not like the US, 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% 12 months on 12 months in January from 5.51% in December, based on authorities information.

Stripping away unstable meals and power costs, core inflation got here in at 3.27% in January 12 months on 12 months, dropping barely from 3.36% in December, information confirmed.

Final week, Indonesia’s central financial institution held its seven-day reverse repo price 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 performed nicely in coordinating its fiscal and financial coverage instruments to include inflation and preserve progress, stated Sri Mulyani.

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

“We additionally know that the supply of inflation shouldn’t be from the central financial institution, from the cash circulation or cash provide. We additionally see that the inflation is coming from some provide aspect. That is why we addressed this subject,” stated Sri Mulyani, stressing inflation will average this 12 months.

Sturdy progress

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

“Final 12 months, we had an excellent 12 months when it comes to progress. We’re 5.3%.  I feel that is additionally … the very best among the many G-20 in addition to the ASEAN international locations,” stated Sri Mulyani.

This 12 months, progress is coming from home consumption and funding, which “are all recovering very strongly,” she added. “Shopper confidence can also be very excessive.”


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