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11 February 2010

Indonesian govt sees no real threat from Euro woes

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Indonesian government will keep a close eye on Euro zone debt worries, which may send jitters to stocks and bonds as well as the local currency, the Jakarta Post reported, quoting the Finance Ministry.

But there is no real threat to Indonesia’s economy with its strong fundamentals, Finance Minister Sri Mulyani Indrawati said Tuesday.

Global stocks fell amid concerns that the governments of Portugal, Italy, Ireland, Greece and Spain will struggle to fund budget deficits, Bloomberg reported.

“Now we see many countries, particularly in Western Europe, facing economic turmoil. This will affect the perception of a stable Euro. The impact to us will be seen from the exchange rates,” Mulyani said.

“There could also be an impact on the expectations of our bonds, where we may see yields and prices considered appropriate,” she added, but said the yield on the government’s five- and 10-year bonds had in fact improved.

On Tuesday, Asian stocks rose for the first time in four days on speculation European officials would help Greece tackle its budget deficit, Bloomberg reported.

The Jakarta Composite Index rose 0.56 percent to close at 2,489.48 on Tuesday.

Mulyani said Indonesia remained an attractive country for investors because of its strong fundamentals.

The economy is estimated to grow more than 4.3 percent in 2009, according to the Central Statistics Agency, which will announce the official growth figure at 11 a.m. on Wednesday. The government estimates the economy will expand 5.2 percent this year. The minister said capital inflow in the past three months was relatively stable.

“The size of our deficit is not too worrisome. If the size of bonds issued this year is compared to the market capacity we can absorb, I don’t see any worrying issues,” she said.

The government plans to sell 175 trillion rupiah (US$18.73 billion) in bonds this year to plug the 2010 budget deficit of 98 trillion rupiah.


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