Bank Indonesia Lifts Economic Growth Forecast

A teller counts bank notes in Jakarta.
Indonesia's economy may grow faster than expected this quarter,
thanks in part to global economic recovery, a central bank official said

Central bank deputy governor Hartadi A Sarwono believes that based on first-quarter results, the country may see 5.6 percent gross domestic product growth in 2010, higher than the bank’s earlier 5.2 percent forecast.Hartadi told the Jakarta Globe that the economy was likely to expand 5.7 percent year-on-year in the first quarter, up from the previous expectation of 4.8 percent. “In February we saw several signs and factors that would contribute to higher economic growth, especially from the external side,” he said. He expected the government and economists to concur with the assessment. Bank Indonesia released a monthly monetary review on Thursday showing that the global economy had improved as indicators in three major economies, the US, Japan and China, were improving. But Europe’s recovery trailed because of Greece. The bank said global factors would help commodity prices rebound and boost the nation’s exports in the first quarter. The central bank said consumer spending had risen early this year, citing indicators such as auto sales rising 69 percent in January, the highest growth in a year, while sales of other non-durable goods also rose. Growth in imports of capital goods in January hit 35.6 percent from the previous month’s 9.29 percent, indicating preparation for more investment. Anggito Abimanyu, head of the Finance Ministry’s fiscal policy agency, said the government also expected the economy to grow more than 5 percent, although February data was needed before making an official forecast revision. “We have a similar assumption as the central bank, based on global economic growth and trade. However, we still cannot measure how strong support is from the domestic side,” he said. The country posted year-on-year growth of 5.4 percent in the last quarter with better-than-expected exports and resilient consumer spending. It was stronger than the 4.4 percent average prediction by economists polled by the Jakarta Globe. The surge caused the country’s full-year growth to reach 4.5 percent. Meanwhile, analysts were split over the impact of the political probe into Bank Century’s controversial bailout. Purbaya Yudi Sadewa, an economist at state brokerage firm PT Danareksa Sekuritas, said business growth expectation had improved in line with better prospects for the global and domestic economies. “Business optimism has not been affected by the Century case. Business players are ready to expand,” he said. Hong Kong-based Political & Economic Risk Consultancy said the politicization of graft in Indonesia had strengthened perceptions of graft in the country. “Those spearheading the anti-corruption fight stepped on so many toes of bureaucrats and politicians that they have become victims of a backlash, seriously hindering their efforts,” it said, placing Indonesia as the most corrupt of the 16 Asia-pacific countries covered.

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