Indonesian minister says soaring oil price not to disturb economy

09:01, December 28, 2010      

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Rising global oil prices which may exceed 100 U.S. dollars a barrel would not disturb Indonesia's economy next year, as the country plans to pump more oil to reduce reliance on imports, Coordinating Minister for Economy Hatta said on Monday.

Global oil price has exceeded 90 U.S. dollars a barrel and is forecast to exceed 100 U.S. dollars a barrel as winter at the Western hemisphere and rising global economic activity have boosted demand of the fossil fuel.

Minister Hatta said the government would not increase oil price for domestic market next year, citing that the country's economy had been resilience when the oil price at over 140 U.S. dollars a barrel years ago.

"It is not necessary to be panic," he said when asked whether the rising oil price would have significant impact on Indonesia's economy next year at the State Palace.

So far, the global oil price has exceeded Indonesia's oil price assumption of 80 U.S. dollars at the state budget in 2011.

Minister Hatta said the government would raise oil output next year to 970,000 barrels a day, higher than this year's target of 950,000 barrels a day.

Some oil and gas firms are targeted to start production in some fields next year, according to officials.

Indonesia has failed to reach output target this year due to leaking at piping, Raden Priyono, head of oil and gas watchdog BP Migas, has said.

The government is to start limiting subsidized oil for private cars in Jakarta at the end of March next year before implementing the policy across the nation by 2013, as an effort to reduce high burden of energy subsidy at the state budget.

"If we are not serious in reducing the use of the fuel, our import will keep rising," he said at the palace.

Rising investment and export amid high consumption are forecast to drive Indonesia's economy to accelerate at 6.4 percent, faster than the 6 percent target of this year.

Strong fundamentals and relatively stable political condition has led Indonesia's economy survived during the global financial routs last year by registering the highest growth of 4.5 percent after China and India.

Indonesia has enjoyed huge capital inflows and attempted to channel the funds at real sectors through initial public offering or right issues of firms at the bourse.

The government targets 5.3 percent inflation next year, lower than this year's expectation of 6.5 to 7 percent, as the great rice harvest in February next year is expected to ease the tension from rice prices, Minister Hatta said.

The government and the central bank would step up coordination to unveil steps to reduce the possibility of sudden reversal of the huge capital inflows, and prepare measures to recover the impact should it happen, central bank governor Darmin Nasution said on Monday.

Improving economy at developed countries is expected to raise demand for export product from Indonesia, which mostly comprise of commodity and natural resource products.

But, the government would not raise export taxes for the export products although it has attempted to boost domestic manufacturing industry as an effort to get the added value from the products.

Source: Xinhua

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