Indonesia Faces Risk Core Inflation Will Climb, Fitch Says - Bloomberg

Indonesia faces the risk accelerating global food an oil prices will speed core inflation in Southeast Asia’s biggest economy, said Andrew Colquhoun, Fitch Ratings head of Asia-Pacific sovereigns.

There may be some risk of inflationary pressures from food and fuel broadening into the rest of the economy, Colquhoun said in Jakarta today. Accelerating core inflation could be very difficult to get back “in its box,” he said.

Consumer-price growth in February slowed to 6.84 percent from a year earlier, compared with a 7.02 percent pace in January, a report showed March 1. Core inflation, a measure of price gains excluding volatile items such as food, gained to 4.36 percent from 4.18 percent. Bank Indonesia has said core inflation may accelerate to about 5 percent this year.

A strengthening rupiah will mitigate any effect on Indonesia’s budget deficit this year, Finance Minister Agus Martowardojo told reporters after making opening remarks at the Fitch presentation today. The deficit won’t rise above 2 percent of gross domestic product, he said.

Indonesia’s sovereign credit rating may reach investment grade in the third quarter, Coordinating Minister for the Economy Hatta Rajasa told reporters in Jakarta today at a separate event.

To contact the reporter on this story: Novrida Manurung in Jakarta