Indonesia rebounds from fuel price hike: central bank chief

Indonesia's economy has rebounded from the impact of a hike in subsidised fuel prices despite rising interest rates and high inflation, the central bank governor said Wednesday.

"I have reported to the president that our economy has begun improving. At the beginning the effect of the fuel price rise gave our economy a slight fever, but we have overcome this," Boediono told reporters.

He said after a meeting with President Susilo Bambang Yudhoyono that foreign exchange reserves were at a healthy 59.6 billion dollars and inflation had "become normal again" following a jump from the fuel hike.

Consumer prices likely peaked last month and would start easing by the end of the year.

The central bank raised its key interest rate by 25 basis points on July 3 to rein in an inflationary surge springing from the 30-percent average hike in fuel prices in May.

The third rise in three months took the benchmark rate to 8.75 percent and came as surging prices across Asia force the region to contemplate unpopular hikes in borrowing costs.

Boediono has said he expects inflation to range between 11.5 and 12.5 percent by year's end, before easing off to between 6.5 and 7.5 percent by the end of 2009. Inflation was running at 11.03 percent in June.

The finance ministry said Southeast Asia's biggest economy would likely grow 6.19 percent in 2008.

Indonesia's reserves should be strengthened further with the expected sales of several state firms this year either via public offerings or through offers to strategic investors.

State-owned enterprises minister Sofyan Djalil said parliament would approve plans to privatise companies such as PT Krakatau Steel and units of plantation firm PT Perkebunan Nusantara next month.

He said the companies would be able to hold initial public offerings later this year.

"I hope approval can be obtained from parliament in August and that the government can quickly conduct the privatisation of several state-owned firms, such as Krakatau Steel," he told reporters.

Krakatau Steel chief executive Fazwar Bujang said his company aimed to offer 20 to 40 percent of its shares in October to raise up to five trillion rupiah (555 million dollars).

"Foreign investors will be prioritised because of the keen interest they expressed during pre-marketing (for the IPO) early last month in Singapore and Hong Kong," Bujang said.

Foreign interest in Indonesia's biggest steelmaker has come from India's Tata Steel, Australia's Bluescope Steel Ltd. and Luxembourg-based giant ArcelorMittal.

- Dow Jones Newswires contributed the story -

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