Indonesia Sees Falling Rupiah Boosting Exports, Finance Minister Says

BY :HERDARU PURNOMO & YUDITH HO

JANUARY 28, 2015

Jakarta. The rupiah’s current level supports exports and helps narrow Indonesia’s current account deficit, Finance Minister Bambang Brodjonegoro said, signaling the government is comfortable with the currency’s 3 percent drop since October.

“[A rate of] 12,500 is already good to maintain our competitiveness,” the minister said during an interview in Jakarta on Tuesday. That level will also tackle the current-account deficit, he said.

The currency was set for a third month of decline, weakening 3.1 percent since the end of October to close at 12,477 in Jakarta, as the dollar strengthened against the majority of regional exchange rates. That compares with the Malaysian ringgit’s 8.6 percent drop in the same period and the Philippine peso’s 1.8 percent gain.

Southeast Asia’s largest economy has grappled with a shortfall in the broadest measure of trade in the past three years as exports contracted in seven of the 12 months through November. The current-account deficit this year will be similar to an expected level of about 3 percent of gross domestic product for 2014, Bank Indonesia said.

President Joko Widodo has taken steps to reduce the risk of capital outflows this year by reforming subsidies and narrowing the budget deficit, Bambang said.

The latest revised budget assumes a deficit of 1.9 percent of gross domestic product for 2015, from 2.4 percent last year.

The priority in the coming year will be on building basic infrastructure to support the government’s goal of accelerating economic growth to 5.7 percent for 2015, he said, from a five-year low of 5.1 percent estimated for 2014.

The European Central Bank’s pledge to embark on a quantitative easing program will spur additional domestic growth from capital inflows, the minister said.

Global funds added Rp 30.4 trillion ($2.4 billion) to their holdings of rupiah-denominated sovereign bonds this month.

Bloomberg

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