Tight Monetary Policy, Threat of Inflation Overshadow Indonesia’s Growth

Thierry Apoteker, founder of research group TAC was speaking at Globe Asia’s Executive Breakfast Talk in Jakarta on Tuesday, May 5, 2014. (GA Photo/Defrizal)

By : Muhamad Al Azhari | on 8:31 PM May 06, 2014
Category : Business, Economy

Jakarta. Investors should bear in mind that tight monetary policy is likely to remain in place in Indonesia, at least until the end of this year, and the economy may not accelerate more than 6 percent, a global economic forecaster said.

“If you take on the policy side, the monetary policy will remain tight this year, while the fiscal policy may be slightly less certain,” due to the political transition, Thierry Apoteker, founder of research group TAC, said in Jakarta on Tuesday.

In regards to Indonesia’s economy, he said: “assuming the business environment stays the same, it is very difficult for the country to have a long-term growth above 6 percent on a sustainable basis.”

Apoteker did not elaborate, but investors often cited poor infrastructure, coupled with rampant corruption, has hindered the country to see stronger economic growth.

The TAC has strong expertise in applied economic and financial research and been assisting multinational companies, banks, asset management firms as well as multilateral organizations.

Apoteker was speaking at Globe Asia’s Executive Breakfast Talk in Jakarta.

The government and the central bank have forecasted that Indonesia’s economy may expand by 5.8 percent this year.

Apoteker said inflationary threats would remain to overshadow the economy.

“Everybody expects inflation to calm down significantly [in Indonesia] after July in a year-on-year term,” Apoteker said.

Bank Indonesia forecast the inflation in the range of 3.5 percent to 5.5 percent this year. Inflation slowed to 7.3 percent in April from a year earlier.

Apoteker said inflation may accelerate to the end of this year, fueled by the expected weakening of the rupiah.

A weak rupiah will increase the cost of the cost of importing goods.

The currency, which declined by 26 percent last year, has gained 5.6 percent so far this year. It traded at Rp 11,511 against the dollar on Tuesday.

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