The impact of the global cooldown on emerging Asian economies such as China showed in sharply lower growth in November exports to 8.25 percent, the first time it has been in single digits since Sept 2009, according to statistics bureau figures.
The trade balance widened in November to $1.52 billion from $1.15 billion in October and the trade minister says export growth will likely stand in single digits in 2012.
Even so, economists said Bank Indonesia was unlikely to cut rates next week as it monitors inflation and waits to see if the global slowdown worsens.
"Inflation has not bottomed yet. January inflation can reach 3.4 percent. But the trend is inflation will go higher, particularly if the government limits subsidised fuels in March or April," said David Sumual, an economist at Bank Central Asia.
"For this month, the BI rate will likely stay but it may be cut in February if inflation falls," Sumual said.
Analysts polled by Reuters had forecast annual inflation would ease to 3.82 percent in December, in line with the central bank's estimate. Annual inflation in November was 4.15 percent.
Core inflation in December also eased slightly more than expected to 4.34 percent from 4.44 percent in November, the statistics bureau said. The measure excludes government-controlled prices of items such as fuel and electricity and is closely watched by the central bank.
Bank Indonesia (BI) slashed its benchmark overnight rate by 75 basis points (bps) in the last quarter of 2011 to a record low 6 percent to boost domestic consumption as exports were expected to slow amid weaker global demand.
It has set an inflation target of 3.5-5.5 percent this year and its governor said inflation could near the upper range at 5.2-5.3 percent if the government decided to hike electricity and subsidised fuel prices.
"The BI rate will likely stay at 6 percent in January because there are still risk aversions, there are still pressures on the rupiah. So a 6 percent rate is still ideal," said Eric A. Sugandi, an economist at Standard Chartered.
"We estimate at the end of the first quarter it will be cut to 5.75 percent and remain there until the year-end," Sugandi said.
Fragile Markets
Most economists polled by Reuters expected BI's five-member board to hold the key rate steady this month, partly to assess the impact of the euro zone debt crisis and to wait for commercial banks to follow its lead by cutting lending rates to ease borrowing costs for businesses.
"We see the BI rate likely being kept steady. This is the beginning of the year when markets are usually a bit fragile. We estimate inflation to reach 5.2 percent by the year-end, and we prefer the BI rate to stay at 6 percent," said Destry Damayanti, an economist at Bank Mandiri.
"But if inflation can reach 5 percent, there is room for the BI rate to be cut by 50 basis points," Damayanti said.
A senior BI official told Reuters in November that market uncertainties would render decisions on rates this year "more complex".
Indonesia's benchmark stock index rose 3.2 percent last year, against a 46 percent rise in 2010, as foreign investors pulled out of the country in the second half of 2011 on worries over the euro zone debt.
Outflows of foreign capital resulted in the rupiah currency losing 0.6 percent last year despite heavy interventions by the central bank to guard it. The rupiah gained 4.6 percent in 2010.
Indonesia in December regained investment grade status from Fitch Ratings thanks to its resilient growth and low public debt, at a time when ratings agencies have downgraded many developed economies.
With Fitch's rivals Standard & Poor's and Moody's expected to follow the move, Indonesia would likely attract more risk-averse investors as its bonds would be added into benchmark global indexes.
