Govt projects 2012 growth at 6.5-6.9 pct

Jakarta (ANTARA News) - The government has projected the domestic economy to expand by a range of 6.5-6.9 percent in 2012, or slightly higher than the economic growth forecast of 6.3 percent set under the 2011 state budget.

Strong domestic consumption, solid investment inflows and improving export performance are expected to remain the engine of economic growth next year.

The improving export performance will be inseparable from the good prospects of the world economy after it saw years of slowdown.

"In 2012, the government believes that the global economy will be getting more prospective. For Indonesia, it will of course have a good impact on the national economy. Therefore, we are optimistic that the economy will accelerate to a level of 6.5-6.9 percent," Finance Minister Agus Martowardojo said when explaining the frame of macro economy and fiscal policy of 2012 at a plenary meeting with the House of Representatives (DPR) here on Friday.

To support the attainment of the 2012 economic growth, Agus Martowardojo said the government also had adopted a number of strategic policies, including increasing the competitive edge of domestic industry, strengthening domestic consumption and improving the investment climate both in the financial sector and the real sector.

In addition, he said the government would also pay special attention to the development of infrastructure facilities both in urban and rural areas. Among the sectors that will be high on the list of the government`s priorities next year will be energy and electricity, transportation, communication, health, and education.

"The government will strive to increase funding support from banks or non-bank financial institutions, capital market, foreign and domestic capital investment, capital spending from the central and regional governments, state-owned and regional government-owned companies," Agus said.

Despite the good prospects of the economic performance in 2012, a lot of global and domestic challenges still had yet to be monitored closely, he said.

Among the global challenges were unequal global economic recovery, continuing crisis in Europe, global currency war and potential hike in the world oil price that would affect inflation, he said.

"On the domestic side, fundamental improvement is needed in the investment climate to increase direct investment performance to support real sector performance and open access to new employment," he said.

For its part, the government would strengthen the country`s economic fundamentals by creating policies that would support strong economic expansion and encouraging sustainable macro-economic stability, he said.

"The government would also conduct total evaluation and create innovations and new policies in various economic dimensions, such as on regulatory aspects, business procedures, legal, taxation, land acquisition, bureaucratic performance and infrastructure conditions," he said.

Deputy Minister of National Development Planning Lukita Dinasyah Tuwo said recently the Indonesian economy might grow 7 percent in 2012. He said the current economic conditions were very conducive to the acceleration of national economic growth. Among the indicators of conducive economic conditions were rising per capita income hitting a record high of US$3,005 and foreign exchange reserves rising to US$105 billion.

Lukita said 2012 was one of the gateways to accelerate and expand the national economic growth, adding 2009 and 2010 were the years of national economic recovery from the global economic crisis and 2011 was the year of speeding up the national economic growth.

Bank Indonesia Governor Darmin Nasution said early this year he believed the prospect of the Indonesian economy would remain strong, with gross domestic product (GDP) expected to reach 6.3 percent in 2011 and 2012.

"The GDP in 2011 and 2012 is expected to grow at a brisk 6.3 percent each, particularly fueled by domestic demand and accelerated investment," he said.

Bank Indonesia has predicted the Indonesian economic growth will show an upward trend until 2015, from 6.0-6.5 percent in 2011, to 6.1-6.6 percent in 2012, 6.2-7.1 percent in 2013, 6.3-7.3 percent in 2014, and 6.5-7.5 percent in 2015.

Head of Bank Indonesia Monetary Policy Bureau Sugeng said recently the high growth must be accompanied by the government`s efforts to reduce dependence on imported goods so that the inflation rate accompanying the growth would not be high.

In its annual economic report published recently, the Asian Development Bank (ADB) said Southeast Asia, including Singapore, Thailand, Malaysia and the Philippines, will grow 5.5 percent in 2011 and 5.7 percent in 2012. Indonesia and Vietnam are expected to expand more than 6 percent for the two-year period.

PT Bank Muamalat Finance and Operations Director Hendiarto has predicted the Indonesian economy would continue to pick up in 2012 thanks to rising foreign investment in the domestic capital market.

"I am optimistic that Indonesia will remain an attractive place to invest in view of the high reference interest rate," he said.

The rupiah`s strengthening which left far behind the government-set target of Rp9,250 per dollar suggested that foreign investors had great interests in investing in Asia, Indonesia in particular, he said.

The Indonesian economy grew by 6.5 percent in the first quarter of 2011, particularly driven by strong consumption and exports.

Finance Minister Agus Martowardojo said on Thursday the national economic growth was lower than that of Vietnam 6.8 percent, Singapore 8.5 percent, and China 9.7 percent but it was higher than that of South Korea 4.2 percent.

The minister said the first-quarter economic growth was 55.7 percent contributed by public consumption. Meanwhile, investment grew 31.3 percent, exports 27.5 percent and imports 29.5 percent compared to the same period last year.

He said foreign investors` confidence in the Indonesian economy remained high as reflected by strong foreign capital inflows. Positive sentiments in the global stock exchanges had caused the share composite index (IHGS) to strengthen and prompted the rupiah to record the highest appreciation among the regional currencies.

"In April alone, capital inflows in the state bond market reached Rp9.85 trillion, the share market Rp17.5 trillion and SBI (Bank Indonesia Certificates) Rp9.71 trillion," he said.

Meanwhile, acting chief of the Fiscal Policy Board at the Finance Ministry Bambang Brodjonegoro said the balance of payment would still record a significant surplus in the second quarter of 2011. The surplus would originate both from current transactions and capital and financial transactions.

He said the current transactions in the first quarter of 2011 recorded a surplus of US$1.9 billion and the figure was expected to reach US$4.4 billion throughout this year.

The capital and financial transactions meanwhile recorded a surplus of US$6.2 billion in the first quarter of 2011, fueled by foreign direct investment and portfolio investment.(*)