2008 10 06 - Jakarta Says Global Crisis Slowing Growth

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 impact.' 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 inflation.' 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 Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.