IMF still upbeat on RI growth

The Jakarta Post, Jakarta

The International Monetary Fund said on Thursday that the country's economy could still grow by between 3.5 percent and 4 percent this year, despite slower-than-expected first quarter growth.

The Central Bureau of Statistics (BPS) announced on Wednesday that the economy grew by 2.47 percent in the first quarter of this year compared to the same period of last year. The growth rate was lower than most experts had expected.

"It's lower than people expected but we still feel that growth of 3.5 percent to 4 percent is possible this year," IMF senior advisor for Asia Pacific Daniel Citrin was quoted by Reuters as saying.

The government has targeted 4 percent economic growth for this year compared to 3.2 percent last year.

Citrin said weak first quarter growth was partly due to severe floods in February, an area where the impact should be temporary.

"Hopefully we'll see recovery in the second quarter," he said.

Citrin is leading an IMF special mission to conduct a regular review of the country's performance in the implementation of the economic reform program sponsored by the Fund under a US$5 billion loan program.

Bank Indonesia, which initially predicted 3.2 percent first quarter growth, has also expressed confidence that the economy could still grow by between 3.5 percent and 4 percent this year.

"I think we'll grow faster in the second quarter and the target of 3.5 percent to 4 percent growth is expected to be met," Bank Indonesia deputy governor Miranda Goeltom said.

First quarter economic growth was mainly driven by higher consumer spending, as exports slowed down due to the global economic downturn.

The Fund said earlier that Indonesia's macroeconomic indicators had been making encouraging progress in the first couple of months of the year as shown by the firmer rupiah against the U.S. dollar and a falling key interest rate.

Separately, Coordinating Minister for the Economy Dorodjatun Kuntjoro-Tjakti was quoted by Antara as saying that inflation could hit 13 percent this year, compared to the 2002 state budget assumption of 9 percent, unless the government took measures to limit the upward pressure on prices.

Speaking to reporters following a Cabinet meeting, Dorodjatun said that the government would try to ensure stability in rice supplies and distribution to prevent prices from surging ahead.

"At the (cabinet) meeting, we talked about the necessity of staying alert ... We must keep a close eye on the supply of rice. We don't want to see inflation run out of control because of food problems," he said.