Indonesia's central bank governor Agus Martowardojo said here Wednesday that the country's consumer price index is forecast to be 7.7 to 8.1 percent this year from the initial expectation of 3.5 to 5.5 percent following the recent price hikes of subsidized fuel.
Indonesian President Joko Widodo on Nov. 17 announced a decision to raise the prices of the commodity by nearly 31 percent, a move aimed at saving more than 100 trillion rupiah (some 82.2 billion U.S. dollars) in next year's budget for financing badly needed infrastructure facilities.
Martwardojo disclosed that the central bank would strive to control inflation to the lower range, saying, "We will certainly attempt to make it reach 7.7 percent."
On month, inflation was projected to accelerate 1.3 to 1.6 percent in November, compared with 0.47 percent in October based on the data from the national statistics bureau.
Martowardojo said inflation in December needed to be watched out as it may accelerate over 2 percent on monthly basis, compared with 1.3 to 1.6 percent expected for November and 0.47 percent in October based on the data from the national statistic bureau.
Soon after the fuel price hikes, the central bank raised its lending facility rate by 50 basis points to 8 percent.
The greater fiscal space from the fuel price hikes, coupled with the cut of budget for travel and meeting of officials by 16 trillion rupiah (about 1.3 billion U.S. dollars) and additional tax earning, would narrow the country's 2015 budget deficit to below 2 percent of the gross domestic product, Finance Minister Bambang Brodjonegoro said on Tuesday.
The finance minister said the economy is expected to expand faster to 5.8 percent next year, compared with this year's target of 5.2 to 5.3 percent.
The central bank has implemented a tight monetary policy since last year to guard the country's economy from global economic turmoil which may spur capital outflows and hit the local currency.
The bank held it benchmark interest rate at 7.5 percent last month, which it has kept since December last year.
President Widodo has set the aim to pursue over 7 percent economic growth within two years mainly through construction of more infrastructure facilities./.