BI projects higher growth of 6% by 2006<\/p>\n
Tony Hotland, The Jakarta Post\/Jakarta<\/p>\n
The country's economic growth is projected to reach about 6
\npercent by 2006, encouraged by the implementation of prudent
\nfiscal and monetary policies as well as the determination by the
\nincoming government to create a more favorable business climate,
\na senior official at Bank Indonesia (BI) says.<\/p>\n
Speaking during an economic seminar held by the Indonesian
\nEconomists Association on Wednesday, BI senior deputy governor
\nMiranda S. Goeltom said domestic consumption would remain the
\nmain driver of growth.<\/p>\n
\"Public consumption will still play a dominant role, although
\nit would be a declining influence. The impact of exports will
\nstart to show in 2005, while new investments would play a big
\nrole in 2006 as the new government's policies in the corporate
\nsectors begin to take effect,\" she said.<\/p>\n
Miranda also projected the industrial, trade, and agriculture
\nsectors would be the major contributors to growth during the next
\ntwo years.<\/p>\n
She said growing public consumption would be supported by an
\nincrease in purchasing power as reflected in a higher real
\ndisposable income.<\/p>\n
\"The public's real disposable income is projected to grow
\nhigher as economic activity increases and the global economy
\nimproves. Improved purchasing power would encourage companies to
\nrevise their sales targets upward and these would include
\nautomotive, telecommunications, and pharmaceutical firms,\" she
\nsaid.<\/p>\n
The country's economy grew by 4.1 percent in 2003 and is
\nexpected to reach 4.8 percent this year. The government has set
\nan ambitious target of 5.5 percent for 2005. The economy needs
\nto grow by at least 6 percent to create enough jobs for the 2.5
\nmillion new jobs seekers each year.<\/p>\n
Miranda said inflation during the next couple of years would
\nbe influenced by fundamental factors, such as supply and demand,
\nadministered prices, and expectations about currency rates and
\ninflation.<\/p>\n
\"For 2005, inflation is expected to be lower than in 2004 from
\n7 percent to 5.6 percent due to the stronger rupiah, lower prices
\nof oil (US$25 in 2005 and $22 in 2006) and imported manufactured
\ngoods. In 2006, there won't be too much pressure on prices given
\nassumptions that these factors display little changes.<\/p>\n
Miranda's predictions seem to ignore the impact of high oil
\nprices, the record levels of over $40 per barrel that show no
\nsign of declining in the immediate future.<\/p>\n
Her growth projection does also not take into account an
\nincoming government having to lower a costly fuel subsidy, a move
\nthat would push up inflation and eat into consumers purchasing
\npower.<\/p>\n
\"(Upward inflationary) pressure would likely come from the
\ndomestic market as the effect of growth. For administered prices,
\nthe government would probably lower subsidies, which would
\nincrease the prices of goods,\" Miranda said.<\/p>\n
On the rupiah, Miranda said: \"Entering 2005, the rupiah would
\nappreciate again and be stable throughout 2006, supported by the
\neuphoria of a new government that induces positive sentiments
\nfrom domestic and international communities. We call it the honey
\nmoon effect.\"<\/p>\n
However, she said the projections were naturally subject to
\nchanges due to global, regional, and domestic risk factors.<\/p>\n
\"For example, there are uncertainties about how developed
\ncountries will tighten their monetary policies and over possible
\nincreases in U.S. benchmark rate.<\/p>\n
\"Besides that, we have to also take into account the
\nincreasing dependence among Asian countries, such as China, and
\nthe phenomenon of stronger foreign exchange reserves dominated by
\nshort-term investments,\" Miranda said.<\/p>",
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