Economy expands by 4.8%: BI<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The economy grew at a snappy 4.8 percent in the first quarter
\nof this year, driven mainly by strong consumer spending,
\naccording to Bank Indonesia Governor Burhanuddin Abdullah.<\/p>\n
He said on Thursday that the strong first quarter gross
\ndomestic product (GDP) growth coupled with further improvements
\nin other macroeconomic indicators boded well for the economy this
\nyear.<\/p>\n
Burhanuddin was speaking to the press following a Cabinet
\nmeeting.<\/p>\n
The first quarter growth figures came in at the top end of the
\ncentral bank's forecast range of 4.3-4.8 percent.<\/p>\n
The government is targeting economic growth of 4.8 percent
\nthis year.<\/p>\n
The official first quarter growth figures will be released by
\nthe Central Statistics Agency (BPS) next month.<\/p>\n
Burhanuddin said that the country's macroeconomic indicators
\nhad continued to improve during the January-March period of this
\nyear.<\/p>\n
He pointed out that the rupiah strengthened to around Rp 8,460
\nper U.S. dollar, inflation eased to 5.11 percent and the central
\nbank's benchmark interest rate had fallen to a record low of 7.34
\npercent.<\/p>\n
He added that the country's foreign exchange reserves had
\nincreased to a record level of US$37.42 billion.<\/p>\n
But Burhanuddin acknowledged that the positive macroeconomic
\ngains had not translated into brisker investment activities.<\/p>\n
"Investment remains scarce," he said, adding that exports had
\ncontributed little to the first quarter growth.<\/p>\n
He said that if the upcoming presidential election proceeded
\nsmoothly, and without violence or major disruptions, investment
\nshould hopefully pick up over the course of the rest of the year
\nas investors would be encouraged by the improving macroeconomic
\nstability.<\/p>\n
The country's economic growth has been mainly driven by
\ndomestic consumption over the past couple of years due to weak
\ninvestment and export performances.<\/p>\n
Analysts have said that both investment and exports are
\ncrucial to pushing the economy to grow at a faster rate of
\nbetween 6 percent and 7 percent in order to be able to create
\nenough jobs for the millions of unemployed people.<\/p>\n
The government has come under strong criticism for failing to
\nrevive the domestic investment climate.<\/p>\n
BI warns of rising bank NPL<\/p>\n
Bank Indonesia said that gross non-performing loans (NPLs) in
\nthe country's banking sector had increased to 8.3 percent during
\nthe first quarter of this year.<\/p>\n
Bank Indonesia Governor Burhanuddin Abdullah, however, said
\nthat net NPL had declined to 2.6 percent.<\/p>\n
"BI has been observing an increase in NPL since February last
\nyear," he said, pointing out that the increase was contributed by
\nboth new loans and unrestructured loan assets acquired from the
\nnow-defunct Indonesian Bank Restructuring Agency (IBRA).<\/p>\n
The central bank has set a 5 percent NPL limit for the banking
\nsector to help ensure the health of the industry, which has just
\nstarted to recover from the late 1990s financial crisis.<\/p>\n
Burhanuddin also said that there had been a rising trend among
\ndepositors to switch their funds from bank time deposits to bonds
\nand foreign exchange investment.<\/p>\n
This was mainly caused by the sharp decline in time deposit
\ninterest rates, forcing depositors to seek alternative
\ninvestments offering better returns.<\/p>\n
According to the central bank, some Rp 15 trillion worth of
\nfunds had been switched from bank deposits into bonds during the
\nfirst quarter of this year, and another Rp 7 trillion into forex
\ninvestment.<\/p>\n
Burhanuddin said the central bank is closely monitoring the
\nsituation to avoid a negative impact on the banking industry.<\/p>",
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