BI Expects Steady Economic Growth for Rest of 2007

Source from:  Urip Hudiono, The Jakarta Post, Jakarta 11/14/2007

The central bank expects the current levels of spending and exports to sustain Indonesia's economic growth at least until the year's end, before facing next year's challenges of rising oil prices and a possible slowdown in the world economy. Growth is expected to remain steady at 6.3 percent in the third quarter, pacing up slightly to 6.4 percent in the fourth, and translating into an overall growth rate of 6.2 percent for 2007, Bank Indonesia senior deputy governor Miranda S. Goeltom said Monday. "Growth will come from more consumption and exports," Miranda said during a hearing with the House of Representatives. The Central Statistics Agency (BPS) is scheduled to announce the official growth figures for the third quarter Thursday. Indonesia's consumption-driven economy expanded by 6 percent and 6.3 percent in the first and second quarters, respectively, helped partly by an increase in exports riding on the back of higher global commodity prices, as well as increasing investment levels. The government is aiming for full-year growth of 6.3 percent this year and 6.8 percent next year -- both of which targets are now facing challenges as a result of the global economic situation. BI has warned that a prolonged rise in crude prices could spur import-led inflation , which could affect consumption and investment. Growth next year might then slow below BI's 6.5 percent estimate. To anticipate such challenges, Miranda said BI would use all available monetary policy options to help keep inflation down and growth sustainable. "This includes letting the rupiah strengthen if our rate policy hits problems in keeping inflation in check," she said. "A stronger rupiah will help ease the pressure from imported inflation, although we have to be careful to ensure that this does not hurt our export competitiveness. We will continue to assess the situation as it develops and deploy the appropriate policies." BI governor Burhanuddin Abdullah said Indonesia could look forward to more exports ahead, given the solid growth in both export volume and value this year. He suggested that the government further improve financing schemes for exporters. Separately, however, the Trade Ministry's director general for foreign trade, Diah Maulida, said that the government might have to revise downwards its export growth target of between 10 and 15 percent for next year. Total exports this year are expected to grow 14.5 percent from US$100.7 billion last year, having already reached $83 billion during the first nine months of 2007. Analysts have suggested that Indonesia shift exports to local consumption or to the region in anticipation of a possible slowdown in the U.S. economy -- which is the main export destination for Indonesia. Enditem