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Jakarta says global crisis slowing growth

Business Times - 06 Oct 2008

(JAKARTA) Indonesia's government said the global credit crisis is slowing exports
and may affect gross domestic product growth in South-east Asia's biggest economy.

'The global liquidity squeeze may continue for the next six months to a year,'
Bank Indonesia governor Boediono said yesterday at a briefing in Jakarta. 'Bank
Indonesia and the government are increasing cooperation so we can limit the

Financial turmoil may force Indonesia to revise its budget estimates for next
year, Finance Minister Sri Mulyani Indrawati said. Indonesian officials met
yesterday, after US lawmakers earlier approved a US$700 billion bank-rescue
package, to try to reduce the impact of the crisis and keep it from spreading in
the US$432 billion South-east Asian economy.

The government's message is 'we are monitoring the situation and will try to
minimize the impact,' said Sim Moh Siong, a strategist with Citigroup in
Singapore. 'One way to do that is to reduce excessive fluctuation in the rupiah
because if the rupiah depreciates it will scare investors away and fuel

The rupiah has dropped 2.3 per cent in the past three months on speculation
overseas investors will stay away from emerging market assets. The benchmark stock
index has declined 33 per cent this year. Markets have been closed since Sept 30
for a Muslim holiday and reopens today.

The central bank said it will buy the currency if needed to boost the measure.
Bank Indonesia has US$58.36 billion of reserves, which are sufficient to meet 4.6
months of imports, senior deputy governor Miranda Goeltom said.

Indonesia's economic growth unexpectedly accelerated 6.4 per cent in the second
quarter as rising prices and demand for coal, palm oil and rubber pushed exports
to a record.

The government foresees growth slowing to 6.2 per cent in 2008 from 6.3 per cent a
year earlier. The government expects its budget deficit will narrow to 1.3 per
cent of GDP this year, from an estimated 1.9 per cent, as spending was reduced.
That makes it 'less urgent,' for the state to sell more bonds this year, Ms Sri
Mulyani said.

Economic leaders across the world are trying to limit the spread of the fallout
from the US. A record number of home foreclosures in the US forced Lehman Brothers
into bankruptcy last month, while Fannie Mae, Freddie Mac and American
International Group were taken over by the government.

European leaders pledged to bail out their own nations' banks while stopping short
of a regional rescue effort to deal with the global credit crisis. -- Bloomberg

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