Three Threats Faced by Indonesia's Economy

JAKARTA - Indonesia is facing three threats which have the potential of disrupting the country’s economy, namely inflation, food and oil price hikes, chief economic minister Hatta Rajasa said.

"I do not see anything that could cause the economy to overheat but we must be alert to the three issues," Hatta, the coordinating minister for economic affairs, said here on Monday. He dismissed views that the country economy was growing too fast opening the possibility of it overheating.

"Actually it is not too fast. Our economy grew 6.1 percent last year and now we have set the target at 6.4 percent. Perhaps the outlook will be 6.6 percent. That is still within the normal range," he said.

Regarding the possibility for the inflation to rise, Hatta said the conditions may also happen in other countries as have been reported by the World Bank and the International Monetary Fund.

"To me what the IMF and the World Bank have said must be alerted. Inflation must be closely watched," he said.

Other threat that could affect Indonesia and therefore need to be monitored is the increasing price of food in the international markets as a result of climate change, he said.

Regarding the oil price, Hatta said from December 2010 to March 2011 the average price of Indonesian Crude reached US$102 per barrel while the assumption for the 2011 budget was set at only US$80 per barrel.

"We must also watch the development of the oil price. On the one hand we are not lucky enough because we could not take a benefit from the rising price because our oil lifting seems not to meet the target," he said.

He said the government was pessimistic the production target for 2011 of 970,000 barrels a day could be achieved. The government must be more realistic about the target as in the past 10 years the lifting target has never been achieved.

Meanwhile for 2012, he said, the government predicts the oil lifting could reach 960,000 barrels per day. According to him, the government would also conduct a study on the possibility of the oil price reaching around US$90 and US$95 per barrel.

Hatta said Indonesia’s oil production in 2012 was expected to start increasing and in 2013 to reach close to one million barrels a day. "We are lucky because we have new reserves and our gas production also keeps increasing."

source ;kompas.com