Reuters: US Dollar Report: RPT-Fitch: Indonesia Fuel, Rate Moves in Line with Policy Assumption

Reuters: US Dollar Report Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

RPT-Fitch: Indonesia Fuel, Rate Moves in Line with Policy Assumption Jun 25th 2013, 10:08 Tue Jun 25, 2013 6:08am EDT (Repeat for additional subscribers) June 25 (Reuters) - (The following statement was released by the rating agency) Recent actions by Indonesian policymakers are a move towards cooling the economy and achieving a sustainable growth rate, Fitch Ratings says. Our assumption that the authorities would manage policy along broadly appropriate lines is one of the factors that supported Indonesia's upgrade to 'BBB-' in December 2011. This assumption remains an important element in our credit assessment. Indonesia's sovereign credit profile has benefitted from stronger and less volatile economic growth than its 'BBB' range peers. While the announced increase in administered fuel prices is a positive development, delivering a macroeconomic policy mix that delivers sustainable growth will be more important. Inflation and current account deficit developments suggest that for Indonesia this may be about 5.5%-6%. The emergence of a current account deficit last year, and inflation running at or above the top of Bank Indonesia's target range, had signalled the risk that loose monetary policy and credit conditions would allow the economy to overheat. BI's 25bp rise in the reference rate to 6% on 13 June - not expected by market participants and following an increase in the overnight deposit rate - is an attempt to address this. But the recent sell-off of emerging-market assets on fears of tightening US monetary policy has maintained pressure on the rupiah and on Indonesian equity and bond markets. Indonesia's foreign reserves fell USD7.6bn or 6.8% to USD105.1bn between end-2012 and end-May 2013. Fitch sees pressure on Indonesia's currency and financial markets as a demonstration of the vulnerabilities that can arise when market confidence in the policy framework is shaken. Inflation and external finances remain important areas. But overall developments remain consistent with a 'BBB-' rating, and this is reflected in our Stable Outlook on Indonesia. The rating is supported by low government debt ratios and still favourable structural growth prospects based on high investment and savings rates, in addition to our expectation that appropriate policy settings will be maintained. Indonesia's Energy and Industrial Resources Minister Jero Wacik announced late on Friday that gasoline prices would rise by 44% and diesel prices by 22%, respectively. The move follows parliamentary approval on 17 June of an amended budget that included a rise in the administered fuel price, together with measures to ease the impact on Indonesia's poorest households. Subsidy reform boosts our confidence that the fiscal deficit can be contained below 3% of GDP, as we expected in our base case. It may also create an opportunity for the Indonesian authorities to allocate fiscal resources to sectors that provide greater long-term economic benefits, such as capital expenditure, health, and/or education. Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions