Rising oil price may hinder Indonesia's growth: president

Indonesian President Susilo Bambang Yudhoyono warned against the volatile global oil prices which could be an obstacle for economic growth in the country in the coming years, local media reported in Jakarta Wednesday.

The oil price has climbed to above 80 U.S. dollars a barrel. The country's central bank has predicted that the inflation in the country next year would be between 4 percent to 6 percent as the global economy stars to recover, according to Wednesday's report on the Jakarta Post.

"Oil and commodity prices are still fluctuating, threatening our economic stability and certainty," Susilo was quoted by the report as saying.

Oil increased for an eighth day, the longest rising streak over two years, as equity indexes rose to one-year high amid positive earnings and speculation policy makers may retract cash added to the financial system. The dollar fell, boosting the appeal of commodities as an alternative investment.

"When oil prices go up, our challenge is to prepare the people to deal with the shock so they can still run their activities and maintain their purchasing power," Finance Minister Sri Mulyani Indrawati was quoted as saying.

The minister added that the government had experienced "difficult" situations in the past five years due to fluctuating global oil prices.

"How does one design a subsidy policy that protects people's purchasing power and the economy, while also maintaining the sustainability of the state budget?" she said.

An increase in the cost of subsidized fuels will hurt people's purchasing power, which contributes 60 percent of Indonesia's economy, according to the Central Statistics Agency (BPS). The government has allocated 7.34 billion U.S dollars in the 2010 state budget to fuel subsidies.

Mulyani refused to comment on whether the government might raise fuel prices next year, as it did in 2008 when global oil prices rose above 120 U.S. dollars per barrel.

In the 2010 budget, the government aims to achieve a 5.5-percent growth rate next year.