Wed, 29 Sep 2010
Jakarta (ANTARA News) - Indonesia`s economic fundementals are now strong enabling the government to shift its policy focus from short-term uncertainty to investment achievement, especially in the infrastructure sector, a World Bank economist said.

"Indonesia has recorded strong economic growth against a backdrop of the world`s economic uncertainty and volatility," the bank`s senior economist for Indonesia, Enrique Blanco Armas, said in a quarterly economic development exposure here on Tuesday.

He said the country`s economic growth in the second quarter reached 6.2 percent, which was the highest since the 2008 crisis driven by domestic demand especially private sector consumption.

"The growth pattern will continue to the near future with investment predicted to increase in line with improving credit access for investors and increasing capital expenditure in 2011," he said.

He said the investment growth in 2010 would be driven by increasing commodity prices, bigger prospects for foreign capital investment and stronger credit growth.

"It will also be helped by needs for investment to increase the capacity in several industries centered in the domestic market," he said.

He said the strong growth was also marked by increasing imports driven by domestic activities and strong rupiah exchange rate while export recovery has slowed down.

"Exports of manufacturing goods keep increasing but exports of mineral resources are stagnant creating a deficit in the trade balance in July," he said.

He said Indonesia could also sustain its economic growth in the midst of food price fluctuations that had caused general inflation to rise to 6.4 percent year-on-year in August 2010.

"The rise in the general inflation is caused by pressures on the offer side due to the impact of weather conditions on food prices from the price of chili to other food stuffs particularly rice," he said.

Under the conditions Enrique predicted that in the short term investment and domestic demand would increase that would contribute to contractions on the surplus in the current account and curbing the fluctuations of food prices but increasing the rate of inflation in 2011.

"The growth of the main trade partners will slow in 2011 after reviving in 2010," he said.

He said the World Bank predicted Indonesia`s economic growth in 2010 would reach six percent up from initial prediction of 5.9 percent.

"The predictions have been revised up because of improving domestic and overseas conditions in the second quarter with the possiblity of downward risks relating to the financial market which changes very quickly and the prospects of the economy to grow towards uncertainty," he said. (*)



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