First quarter GDP estimated at 3% to 3.5%

First quarter GDP estimated at 3% to 3.5%

The Jakarta Post, Jakarta

Bank Indonesia said the economy grew by an estimated 3 percent to
3.5 percent in the first quarter of this year compared to the
same period last year on the back of improvements in investment,
exports and government spending.

But household consumption, which had been expected to be the
main driver of growth this year, seems to be slowing down, the
central bank said.

"While consumption showed indications of slowing, investment
activity, exports and government spending showed improvements
over the previous quarter," the bank said Thursday in a
statement.

The government has targeted economic growth of 4 percent this
year compared to 3.32 percent last year.

But the Asian Development Bank said earlier that gross
domestic product (GDP) growth this year would likely reach only 3
percent.

Analysts have said that GDP growth would be higher in the
third and fourth quarter as an expected recovery in the U.S.
economy would further increase exports.

Exports in February rose by 4.36 percent to US$4.18 billion
from $4 billion in January. This is the best export performance
since October last year.

The central bank also said that inflation remained a worry,
signaling that interest rates would likely remain high for the
time being.

The central bank has been trying to guide down its benchmark
interest rate from nearly 18 percent late last year to 16.70
percent now. But this level is still considered high.

Bank Indonesia said that the serious floods in the first
quarter, which disrupted food distribution, and the rise in fuel
prices had been the main factors resulting in strong inflationary
pressures.

Year-on-year inflation in March was 14.08 percent. The
government has targeted an inflation level of 9 percent this
year.

With oil prices increasing due to the current Middle East
crisis, the government is likely to increase fuel prices again
early next month.

Elsewhere, Bank Indonesia said a relatively peaceful situation
and some progress with the economic reform program, including the
recent divestment of the government's controlling stake in Bank
Central Asia, had improved market sentiment and reduced perceived
business risks.

Bank Indonesia also said that a positive outcome from two-day
debt rescheduling talks between the government and the Paris Club
of creditor nations on Thursday and Friday would contribute to
the optimistic sentiment.

The government is seeking a rescheduling facility for some
$5.5 billion in sovereign debts maturing this year and next to
help limit the state budget deficit to a safer level of 2.5
percent of GDP.

"These various indicators have in turn strengthened the rupiah
gradually and led to a declines in the central bank SBI rates,"
the bank said.

The rupiah has strengthened to a seven-month high lately on
the back of the recent positive news. The local unit closed
at Rp 9,530 per dollar late Thursday from 9,590 previously.