2009 Growth May Fall to 4.4 %
Muhamad Al Azhari
In a report released on Wednesday, the World Bank said Indonesia’s economic growth rate could slow to 4.4 percent next year from 6 percent in 2008, assuming a prolonged global economic recession affecting both investment and exports.
That forecast, contained in the bank’s Indonesia Quarterly Economic Update, is slightly more pessimistic than the 4.5 percent to
6 percent growth estimate put forth by Finance Minister Sri Mulyani Indrawati earlier this month. At the time, Sri Mulyani said that Indonesia would likely feel the greatest impact of the world economic crisis in the first quarter of next year.
The bank’s statement noted that, like many other countries, Indonesia “has had to cope with the immediate ripple effects of the turmoil and crisis of confidence that has disrupted the global financial system since mid-September, while at the same time preparing for an anticipated growth slowdown and continued tight liquidity in the coming quarters.”
Based on the assumption of “a prolonged global recession roughly comparable to the one in 1982,” which was the worst for a composite of Indonesian trading partners from the 1970s to the present, “Indonesia’s growth is projected to fall from [a projected] 6 percent in 2008 to approximately 4.4 percent in 2009,” the report said, adding that “investment and exports are expected to be most affected by the current economic turmoil.”
The bank further forecast that Indonesia’s investment growth could be flat in 2009, before recovering to around 7 percent in 2010.
Growth in export volume is estimated to slow from 14 percent this year to between 1 percent and 2 percent in 2009, before strengthening to 8 percent in 2010.
As a result of the slower economic growth, the bank said Indonesia’s poverty reduction efforts could slow in 2009.
The country’s poverty rate, among the highest in Asia, stood at 15.42 percent in March, the Central Bureau of Statistics reported in July. Indonesia’s poor numbered some 34.96 million as of March 2008.
Assuming the bank’s 4.4 percent GDP growth estimate for next year holds true, 13.8 percent of Indonesians could find themselves below the poverty line in 2009. That compares to the bank’s forecast of a 13.1 percent poverty rate if the economy were to grow by 6 percent.
Separately, the World Bank also announced that it had approved $950 million in program loans for Indonesia as part of the bank’s commitment to improve the country’s investment climate, fiscal management and infrastructure.
The loans include $750 million aimed at accelerating taxation and budgetary reform, as well as
$200 million to support infrastructure investment and help address governance issues like land acquisition, procurements and environmental protection.
The program funds are separate from the government’s request for standby loans from the bank.
In a report released on Wednesday, the World Bank said Indonesia’s economic growth rate could slow to 4.4 percent next year from 6 percent in 2008, assuming a prolonged global economic recession affecting both investment and exports.
That forecast, contained in the bank’s Indonesia Quarterly Economic Update, is slightly more pessimistic than the 4.5 percent to
6 percent growth estimate put forth by Finance Minister Sri Mulyani Indrawati earlier this month. At the time, Sri Mulyani said that Indonesia would likely feel the greatest impact of the world economic crisis in the first quarter of next year.
The bank’s statement noted that, like many other countries, Indonesia “has had to cope with the immediate ripple effects of the turmoil and crisis of confidence that has disrupted the global financial system since mid-September, while at the same time preparing for an anticipated growth slowdown and continued tight liquidity in the coming quarters.”
Based on the assumption of “a prolonged global recession roughly comparable to the one in 1982,” which was the worst for a composite of Indonesian trading partners from the 1970s to the present, “Indonesia’s growth is projected to fall from [a projected] 6 percent in 2008 to approximately 4.4 percent in 2009,” the report said, adding that “investment and exports are expected to be most affected by the current economic turmoil.”
The bank further forecast that Indonesia’s investment growth could be flat in 2009, before recovering to around 7 percent in 2010.
Growth in export volume is estimated to slow from 14 percent this year to between 1 percent and 2 percent in 2009, before strengthening to 8 percent in 2010.
As a result of the slower economic growth, the bank said Indonesia’s poverty reduction efforts could slow in 2009.
The country’s poverty rate, among the highest in Asia, stood at 15.42 percent in March, the Central Bureau of Statistics reported in July. Indonesia’s poor numbered some 34.96 million as of March 2008.
Assuming the bank’s 4.4 percent GDP growth estimate for next year holds true, 13.8 percent of Indonesians could find themselves below the poverty line in 2009. That compares to the bank’s forecast of a 13.1 percent poverty rate if the economy were to grow by 6 percent.
Separately, the World Bank also announced that it had approved $950 million in program loans for Indonesia as part of the bank’s commitment to improve the country’s investment climate, fiscal management and infrastructure.
The loans include $750 million aimed at accelerating taxation and budgetary reform, as well as
$200 million to support infrastructure investment and help address governance issues like land acquisition, procurements and environmental protection.
The program funds are separate from the government’s request for standby loans from the bank.