Fri, 12 Feb 2010

From: The Jakarta Globe

By Dion Bisara, Reva Sasistiya & Camelia Pasandaran
External factors still pose a threat to growth despite the country’s robust economic performance through the global downturn, Finance Minister Sri Mulyani Indrawati warned on Thursday.

Sri Mulyani said the government had no immediate plans to revise its 5.5 percent growth forecast for this year.

“For one thing, our achievement in past quarters has been encouraging. On the other hand, we still see downside risks, mainly external,” she said.

Sri Mulyani said Indonesia must take a cautious view because there is a danger that the global economic recovery will stall as large developed nations begin withdrawing their fiscal stimulus packages.

“Indonesia has to be extremely careful and manage all its external factors to not make another confidence crisis,” Sri Mulyani said.

Indonesia posted growth in gross domestic product of 4.5 percent last year, slightly higher than the government’s forecast, thanks to better-than-expected exports and resilient consumer spending, the Central Statistics Agency (BPS) announced on Wednesday.

Fourth-quarter GDP growth was the highest since the third quarter of 2008, when the economy expanded by 6.25 percent.

Separately, President Susilo Bambang Yudhoyono said Indonesia must capitalize on the momentum from last year’s solid economic performance.

“This means our policy to minimize the impact of the crisis has reached its goal. We must keep this precondition [to grow]. I don’t want the momentum we have now not being used well,” Yudhoyono said at the State Palace on Thursday.

On Wednesday, Ross O’Brien, director of the Corporate Network at the Economist Intelligence Unit in Hong Kong, warned that slow progress on infrastructure, rising global food prices, energy-security issues and the fragility of the global recovery may dent Indonesia’s economic prospects.

Economic growth has long been hampered by poor infrastructure, with aging ports and railways adding to the country’s transport woes, while power shortages afflict many parts of the country. The government has estimated that the country needs nearly Rp 2 quadrillion ($214 billion) a year of physical investment over the next five years.

O’Brien, who was speaking on the sidelines of a seminar organized by the British Chamber of Commerce in Jakarta, predicted that Indonesia’s economy would expand by 5.3 percent this year.

He said he expected GDP growth to rise to 5.6 percent in 2011 and 2012, increasing further to 5.8 percent in 2013 and 6 percent in 2014.

Indonesia’s prospects are underpinned by its huge labor force, strong domestic demand and relatively stable political climate, O’Brien said.

In terms of energy security, Indonesia’s oil-refining capacity, currently at 1.05 million barrels a day, is only enough to supply 70 percent of the domestic demand for petroleum products.

With global food prices picking up once again, inflation accelerated to the fastest pace in seven months in January.