Sat, 04 Jul 2009
From: Antara News
By Eliswan Azly
Jakarta (ANTARA News) - Indonesia is predicted to have brighter economic prospects next year in 2010 in tandem with the recovery of the world economy on account of the country`s ability to boost its exports, an observer says.

"The country`s economic prospects will be better if the world economy begins to recover in 2010," Umar Juoro, director of the centre for Information and Development Studies (Cides), said here over the weekend.

With the recovery of the world economy next year, the growth of the Indonesian economy would be able to return to the six percent level, he said, adding that a six percent growth would be helpful to boost the country`s exports and imports, thus enabling the country to enhance domestic and foreign investment.

He said the economy would make steady progress if infrastructure development was boosted significantly and the stimulus policy was properly implemented.

The problems faced in infrastructure development are not always linked to financing but also to structural matters such as land clearance, tariffs and legal uncertainties.
"The structural problems cannot be solved soon but by making improvements in stages, the country`s economy will certainly develp better in the future," Juoro said.

In commenting on Indonesia`s economic prospects next year, credit rating agency Moody`s Investors Service has upgraded Indonesia`s sovereign credit rating outlook to positive from stable, citing the country`s strong economic potential and effective fiscal policy.

"The improvement in the outlook was prompted by Indonesia`s relatively strong growth prospects and an increasingly effective macro-economic policy framework," said Aninda Mitra, a Moody`s vice president and sovereign analyst for Indonesia.

The country`s strong domestic demand and a balanced economy with an investment momentum that was less susceptible to external trade or financial shocks has given it a relatively good growth outlook, she said.

"A pick-up in economic activity to its recent [growth] rate of 5.5 percent is expected in 2010," Mitra said, adding that Indonesia`s overall growth dynamics are steadier and better positioned than other regional economies.

Indonesia`s debt-market assets are termed speculative by Moody`s with a Ba3 rating. Obligations rated Ba are considered to be of questionable credit quality. The country needs three more rating upgrades before reaching investment grade, and the change in outlook from stable to positive may improve the chances of this happening.

Finance Minister Sri Mulyani Indrawati welcomed the upgrade, saying it shows the economy had lower potential risks [of default] compared with others that they have appraised "the benchmark countries that are included in our group."

Sri Mulyani added that "a positive [outlook] means there is a greater possibility of a ratings upgrade."

According to Moody`s, "the time horizon for rating outlooks is generally 12 months to 18 months, although developments could prompt earlier rating action."

Speaking in Forbes Global CEO Conference in Singapore in t2006, President Susilo Bambang Yudhoyono predicted the Indonesian economy would double in size in the next ten years.

"I am convinced that with the right policies and lots of hard work, and perhaps a little luck, Indonesia`s GDP will double in the next 10 years," he said.

Inflation, he said, would be reined in to single digit levels and foreign investment would be wooed with reforms making Indonesia "an easy, attractive and profitable place for business to grow". By 2010 the tax rate will have been reduced from 30 to 25%, he said, and corruption would be better handled.

Some of the assembled businessmen at the conference in Singapore were curious as to Indonesia's plans and abilities in competing with the giants of China and India.

Yudhoyono asserted that after 2010 Indonesia would be ready to go head to head with
those countries, whose economies he suggested suffered from over-heating.

Referring to the economic growth in the current global financial crisis, Juoro said that in the first quarter of 2009 Indonesia`s economic growth was recorded at 4.4 percent, which was supported by people`s consumption which grew 5.8 percent and government expenditures.

He said that although the country`s exports experienced a negative growth by 20 percent, the current account and trade balance remained positive as the negative growth of imports was bigger than that of exports.

Of late, the rupiah value and capital market index have also gained significant strength. This is because Indonesia`s economic prospect was considered goods so that investors invested their funds in a market which they expected to provide high gains.

"The rupiah value and capital market index are predicted to continue to gain strength, although in certain times they would occasionally weaken," he said.

So, he said, it is not an exaggeration to say that the rupiah will reach Rp9,500 level per US dollar and the capital market index will reach 2,300.(*)



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