MINISTER PREDICTS INFLATIONARY PRESSURES IN SECOND SEMESTER

Jakarta, April 10 (ANTARA) - Finance Minister Sri Mulyani Indrawati predicts inflationary pressures will occur in the second semester of 2010 in line with price changes made through subisidies.

Therefore, she said at a meeting with the House of Representatives' Budget Committee here on Friday, the macro-assumption for inflation would be changed from 5.0 percent to 5.7 percent in the Revised 2010 State Budget.

She said the 5.7 percent inflation was the highest prediction based on fundamental factors such as the declining output gap and increasing inflation expectations as well as appreciation of the rupiah which would reduce imported inflation.

The forecast is also based upon non-fundamental factors such as changes in the fixed price of electricity, implementation of kerosene to gas conversion, pressure on the price of non-subsidized commodities and seasonal pressures.

"In view of that, the range remains within the inflation target of five plus and minus one percent," she said.

The minister said the assumed five percent inflation was very realistice as the floor benchmark while the assumed 5.7 percent as the ceiling.

"In view of the inflation in the last three months, the government's decision to stick to 5.7 percent as the highest projected ceiling and the five percent range is very realistic upper end," she said.

She said the change in the macro assumptions was made in view of the world's economic growth and increasing trade that has boosted exports and investment in Indonesia and of the increasing price of international commodities that has made inflation in the world to rise including in Indonesia to affect nominal interests, in addition to the appreciation of the rupiah exchange rate in the first semester due to a positive balance of payment.