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.