May 5, 2011 / 3:28 AM / 7 years ago

UPDATE 1-Indonesia finmin confident of inflation within target

* Finmin comfortable with rupiah around 8,600 per dollar

* Growth on track for 6.4 pct this yr (Adds context, details)

By John Ruwitch

HANOI, May 5 (Reuters) - Indonesia’s finance minister Agus Martowardojo said on Thursday he is confident inflation can be kept within the government’s target this year, despite building inflationary pressures that some economists say will make that task difficult.

The central bank has allowed the rupiah to appreciate some 5 percent so far this year to near a 7-year high of about 8,600 per dollar to fight inflation and help mitigate a wave of incoming capital, and Martowardojo said he was comfortable that exporters could be competitive at that level.

“We are confident the government will be able to contain inflation within the inflation target for 2011,” he told a forum at the Asian Development Bank’s annual meeting in the Vietnamese capital, Hanoi.

The target for the year is 5.3 percent. Indonesia’s annual inflation has slowed for three consecutive months to April as food prices eased, giving the central bank room to leave rates on hold again at a review next week, though economists still expect a hike in coming months as core inflation picks up. [ID:nL3E7G20E5]

Headline annual inflation eased in April to a six-month low of 6.16 percent.

He said he expected the currency to “maintain a higher degree of stability” around 8,600 to 9,000 rupiah per dollar. At about 0300 GMT on Thursday the currency was at about 8,565 per dollar.

At the 8,600 level, he said he was comfortable and believed “it’s still an exchange rate that can make our exporters remain competitive”.

As with other countries in the region, inflation is a threat to Southeast Asia’s biggest economy and the central bank raised interest rates once in February.

The government is set to release its first quarter growth figures on Thursday morning. Economists polled by Reuters forecast the economy grew 6.6 percent from the same period last year and 1.8 percent from the previous quarter.

“The vital signs for the Indonesian economy are its strongest in the last decade and the fundamentals are improving,” Martowardojo said.

“GDP growth is expected to accelerate to 6.4 percent in 2011, expanding further the strong 6.1 percent growth in 2010,” he added.

Reporting by John Ruwitch; Editing by John Mair

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