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The rupiah, Asia’s best-performing currency this year, isn’t overvalued and gains will help curb increases in consumer prices, International Monetary Fund senior resident representative Milan Zavadjil said.

Indonesia has fared better than its neighbors during the global economic slump, with growth in the $514 billion economy accelerating for the first time in a year last quarter. Its current account has been in surplus this year, swinging from a deficit in the fourth quarter of 2008.

“We think the strengthening of the rupiah has been in line with fundamentals,” Zavadjil said in Jakarta on Monday.

“We don’t see signs of overvaluation. The current account is still in surplus and not showing much of a trend yet toward a deficit, despite the fact that Indonesia is growing more rapidly than its trading partners.”

The rupiah has appreciated 16 percent this year, almost double the pace of the South Korean won, the second-best performing currency in the region. It reached 9,280 per dollar on Oct. 15, the highest level since September 2008 and traded at 9,380 as of 4:00 p.m. in Jakarta.

Gains may be about to peter out, according to the median estimate of 20 analysts surveyed by Bloomberg News, who predict the currency will trade at 9,300 through the first half of next year, a rise of 0.8 percent from Monday’s spot rate.

The country’s gross domestic product increased 4.2 percent in the third quarter from a year earlier, the government reported last week. President Susilo Bambang Yudhoyono aims to achieve growth of 7 percent by the end of his second five-year term in 2014.

He said last month his government would remove “bottlenecks” that hinder infrastructure projects such as energy, new roads and ports. “Growth was already well over 6 percent just before the crisis,” Zavadjil said. “It’s just a question of implementing all these measures they are currently planning for growth to reach 6 percent to 7 percent and to stay there.”

Overseas investors plowed funds into Indonesian stocks and bonds this year to benefit from the fastest growth in Southeast Asia. The Jakarta Composite Index surged 81 percent as funds based abroad purchased $763 million more local shares than they sold, according to stock exchange data.

Rupiah-denominated bonds have returned 20 percent in 2009, the best performance among 10 local-currency debt indexes compiled by HSBC Holdings. Overseas investors poured 103.3 trillion rupiah ($11 billion) into the debt as of Nov. 12 from Rp 87.6 trillion at the end of 2008, figures from the Finance Ministry show.

Indonesia has tolerated strength in the rupiah as gains temper inflation, Zavadjil said. Consumer prices rose 2.57 percent in October from a year earlier, the government reported this month. Increases may accelerate to between 4 percent and 6 percent next year, the central bank said on Nov. 4.

“Bank Indonesia has been very accepting of this appreciation,” Zavadjil said. “It also helps them control inflationary pressures.” The central bank “has only intervened to curb volatility,” he said.

Zavadjil said the country’s finances may enable the nation to win a credit rating upgrade. Moody’s Investors Service on Sept. 16 raised the rating by one notch to Ba2, two levels below investment grade, citing the economy’s resilience to recession.

The current-account surplus increased to $3.1 billion in the second quarter from $2.9 billion in the first three months of the year, central bank data show. Third-quarter data are due to be released this week.

“There are a lot of indicators pointing to the possibility of upgrades,” Zavadjil said. “For example, a low budget deficit, low public debt, the current-account is in surplus, and the banking system is solvent and liquid.”



Bloomberg