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