The impact of the global cooldown on emerging Asian
economies such as China showed in sharply lower growth in November exports to
8.25 percent, the first time it has been in single digits since Sept 2009,
according to statistics bureau figures.
The trade balance widened in November to $1.52 billion
from $1.15 billion in October and the trade minister says export growth will
likely stand in single digits in 2012.
Even so, economists said Bank Indonesia was unlikely to
cut rates next week as it monitors inflation and waits to see if the global
slowdown worsens.
"Inflation has not bottomed yet. January inflation
can reach 3.4 percent. But the trend is inflation will go higher, particularly
if the government limits subsidized fuels in March or April," said David
Sumual, an economist at Bank Central Asia.
"For this month, the BI rate will likely stay but it
may be cut in February if inflation falls," Sumual said.
Analysts polled by Reuters had forecast annual inflation
would ease to 3.82 percent in December, in line with the central bank's
estimate. Annual inflation in November was 4.15 percent.
Core inflation in December also eased slightly more than
expected to 4.34 percent from 4.44 percent in November, the statistics bureau
said. The measure excludes government-controlled prices of items such as fuel
and electricity and is closely watched by the central bank.
Bank Indonesia (BI) slashed its benchmark overnight rate
by 75 basis points (bps) in the last quarter of 2011 to a record low 6 percent
to boost domestic consumption as exports were expected to slow amid weaker
global demand.
It has set an inflation target of 3.5-5.5 percent this
year and its governor said inflation could near the upper range at 5.2-5.3
percent if the government decided to hike electricity and subsidized fuel
prices.
"The BI rate will likely stay at 6 percent in
January because there are still risk aversions, there are still pressures on
the rupiah. So a 6 percent rate is still ideal," said Eric A. Sugandi, an
economist at Standard Chartered.
"We estimate at the end of the first quarter it will
be cut to 5.75 percent and remain there until the year-end," Sugandi
said.
FRAGILE MARKETS
Most economists polled by Reuters expected BI's
five-member board to hold the key rate steady this month, partly to assess the
impact of the euro zone debt crisis and to wait for commercial banks to follow
its lead by cutting lending rates to ease borrowing costs for businesses.
"We see the BI rate likely being kept steady. This
is the beginning of the year when markets are usually a bit fragile. We
estimate inflation to reach 5.2 percent by the year-end, and we prefer the BI
rate to stay at 6 percent," said Destry Damayanti, an economist at Bank
Mandiri.
"But if inflation can reach 5 percent, there is room
for the BI rate to be cut by 50 basis points," Damayanti said.
A senior BI official told Reuters in November that market
uncertainties would render decisions on rates this year "more
complex".
Indonesia's benchmark stock index rose 3.2 percent last
year, against a 46 percent rise in 2010, as foreign investors pulled out of the
country in the second half of 2011 on worries over the euro zone debt.
Outflows of foreign capital resulted in the rupiah currency
losing 0.6 percent last year despite heavy interventions by the central bank to
guard it. The rupiah gained 4.6 percent in 2010.
Indonesia in December regained investment grade status
from Fitch Ratings thanks to its resilient growth and low public debt, at a
time when ratings agencies have downgraded many developed economies.
With Fitch's rivals Standard & Poor's and Moody's
expected to follow the move, Indonesia would likely attract more risk-averse
investors as its bonds would be added into benchmark global indexes.
