Indonesia is taking steps to make its economy more resilient to withstand global shocks such as inflation, especially from the United States, Finance Minister Sri Mulyani Indrawati said.
As the world’s largest economy, what the US does has strong implications around the world, including Indonesia, the minister said.
To fight inflation, the United States has raised interest rates, which has affected capital outflows due to a strengthening dollar, Sri Mulyani told CNBC.Asia street signs” on Thursday.
In light of this, the finance minister said, Indonesia is making more efforts to “increase our resilience”.
This includes “first, making sure that the financial sector is healthy and strong for this interest rate move. Second, that the real sector economy will also be resilient to absorb this shock,” said Sri Mulyani, who is participating. and Meeting of the group of 20 finance ministers and heads of central banks this week in India.
At the beginning of February, US central bank raised the base interest rate by a quarter of a percentage point and there was little indication that the end of this tourist cycle was coming.
Inflation moderates
Unlike the United States, where inflation remains stubbornly highIndonesia’s inflation slowed in January.
The overall consumer price index, a key indicator of inflation, fell to 5.28% year-on-year in January from 5.51% in December, according to government data.
After removing volatile food and energy prices, core inflation reached 3.27% year-on-year in January, down slightly from December’s 3.36%.
Last week, Indonesia’s central bank held its seven-day reverse repo rate at 5.75%, pausing after six consecutive hikes. But inflation still remains high Bank Indonesia target range between 2% and 4%.
Still, Indonesia has done well in coordinating its fiscal and monetary policy tools to curb inflation and sustain growth, Sri Mulyani said.
She added that the government is also supporting the central bank to ensure that inflation remains low so as not to harm the purchasing power of its people.
“We also know that the source of inflation does not come from the central bank, from money circulation or money supply. We also see that inflation is coming from some supply side. That is why we have addressed this issue,” Sri Mulyani said, stressing that inflation will moderate this year.
Strong growth
Despite the global slowdown, Indonesia’s economic growth remains strong as domestic demand continues to improve, the minister added.
“Last year we had a very good year in terms of growth. We are at 5.3%. I think it is also… the highest among the G-20 and ASEAN countries,” Sri Mulyani said.
Growth this year is coming from domestic consumption and investment, which are “all recovering very strongly,” she added. “Consumer confidence is also very high.”
