Finance Minister Sri Mulyani Indrawati - Photo by Finance Ministry

JAKARTA (TheInsiderStories) – Finance Minister Sri Mulyani Indrawati give a signal a possibility to change government policy if the global economic conditions are more difficult to predict and make the domestic economy not vulnerable to external pressure.

“The government will continue to maintain flexibility, want to change and continue to improve the policy formula if global conditions continue to move. We must also respond and even strengthen our economy,” she said at the Ministry of Finance, Jakarta, on Friday (05/10).

The minister urged, the government together with Bank Indonesia (BI) and the Financial Services Authority (FSA) will continue to monitor the developments in the global economy.

This coordination is also carried out to strengthen domestic economic conditions that have been pursued through the improvement of the current account balance which is still experiencing a deficit by suppressing imports of consumer goods as well as encouraging the 20 percent biodiesel utilization program (B20).

Nevertheless, Indrawati explained, the government will also strengthen the fiscal side by formulating a credible 2019 State Budget and adjusting to the latest global developments so that it can be an incentive to support development performance.

In addition, the government will continue to communicate with business people in order to take advantage of the current momentum to boost export performance so that global dynamics do not have a negative impact on the resilience of the Indonesian economy.

At the same place, Coordinating Minister for Economic Affairs Darmin Nasution said that the depreciation of the Rupiah, which has now reach a new psychological level at 15,000 per US dollar, could boost imported inflation.

“Our imports are about 30 percent of the economy. It can indeed have a rather high influence on inflation, it can be 2.5 percent or three percent,” said Nasution.

Based on the Statistics Indonesia data, the core component in September experienced inflation of 0.28 percent. The inflation rate of the core component of the calendar year (January-September) is 2.38 percent and year-on-year (September 2018 to September 2017) of 2.82 percent.

BI said the inflation rate in the first week of October 2018 on a monthly basis reached 0.01 percent or year on year 2.89 percent. The governor Perry Warjiyo at the BI Office stated, “Our estimation inflation is 0.01 percent month to month and year on year 2.89 percent.”

With these developments, he believes the inflation rate so far this year will be slightly below the midpoint of the BI inflation target in the range of 2.5-4.5 percent.

To keep the inflation rate from impacting the weakening of the Rupiah, he said, the central bank will be in the market to monitor and carry out stabilization measures. One of them is by ensuring supply and needs move well on the foreign exchange market.

Warjiyo added, the weakening of the Rupiah because of the strengthening of the US dollar which was accompanied by an increase in yields on US 10-year Treasury Bill to 3.23 percent.

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