The economic growth still will largely rely on interest rate, Danareksa Institute Chief Economist Yudhi Purbaya Sadewa said at a discussion on market outlook 2011 here on Wednesday.
Based on historical data, an interest rate of below 10 percent will be able to push up growth, he said.
Meanwhile, the interest rate will very much depend on the inflation rate in the country, he said.
He predicted the 2011 inflation rate will move to a level of 6.2 percent, slightly down from 6.96 percent the year before.
Yet the trend of inflation rate will still have the potential to go up, fueled by extreme weather and electricity tariff hikes, he said.
"Given the prospects for the inflation rate, what`s likely ahead is that pressure on the BI Rate will increase even though it still can be maintained at 6.5 percent," he said.
Under these circumstances, the low interest rate is expected to serve as monetary stimulus to the economic growth, he said.
The conducive banking system, coupled with the rupiah`s stable exchange rate against the dollar is expected to boost the economic growth this year, he said.
Overall, the Indonesian economy is entering the new phase of expansion expected to go on until 2016, he said.
Despite the good prospects for the Indonesian economy this year, he warned of global factors that may have an adverse impact on the national economy. He said The Fed rate is expected to remain low.
Although several main indicators of the European economy are improving its growth has begun to slow down. "This suggests that the European economy will slow down in upcoming years," he said.(*)
Editor: Aditia Maruli Radja
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