RI economy may grow less than expected
Written by Writer on Wednesday, November 12th, 2008
RI economy may grow less than expected
Aditya Suharmoko , The Jakarta Post , Jakarta | Tue, 11/11/2008 10:57 AM | Business
Indonesia’s economy may expand only within the 5 percent range next year, less than the 6 percent expected in the 2009 state budget, as demand for exports is likely to fall because of the global economic downturn, the central bank and government officials say.
“Economic growth may be between 5.3 percent and 5.4 percent as the world’s economy is slowing down. A growth of within the 5 percent range in 2009 is good enough,” Bank Indonesia (BI) deputy governor Hartadi A. Sarwono said Monday.
Attending a Group of 20 (G20) meeting in Brazil, Finance Minister Sri Mulyani Indrawati said Indonesia’s economic growth might be as little as 5 percent next year.
“It will be very, very challenging for us to maintain growth under the current circumstances. Just like other developing countries, we have to be prepared for a longer period of weakening in the economy,” she said as quoted by Bloomberg.
In the 2009 proposed state budget, the government is looking at 6 percent growth, up from a forecast 6.3 percent this year.
Hartadi said the government should prioritize crucial projects, including infrastructure and manufacturing, to spur economic growth next year.
In the 2009 budget, the government has allocated Rp 10 trillion (US$915.33 million) worth of incentives in the form of waived income and value-added taxes to help generate growth in the manufacturing sector.
“The government’s ability to finance priority projects will become important. As for banks, we will plan a prudent level of growth in lending that will not disturb economic activities,” said Hartadi.
Hartadi said bank loans might grow by 22 percent in 2009, down from an estimated 33 percent growth this year, with working capital loans driving growth. In September, lending grew by 34.6 percent.
“What’s important is sufficient liquidity to spur economic growth. BI will monitor it day to day so that it will not get clogged up,” he said.
To provide sufficient liquidity, BI has cut the minimum reserve requirement (GWM) for bank’s rupiah holdings to 7.5 percent, from previously 9.08 percent on average and the GWM of dollar holdings to 1 percent, from 3 percent.
Hartadi also said BI would maintain rupiah appreciation against the dollar as this would affect inflation. A weakening rupiah would cause higher imported inflation.
The rupiah fell on speculation companies were hoarding dollars to meet import payments and pay overseas debt, according to a Bloomberg report.
The rupiah was the worst performer among Asia’s 10 most-active currencies as overseas investors sold more Indonesian shares than they bought on four of the last five trading days, the report says.
The rupiah weakened 0.2 percent to 10,925 per dollar as of 4:18 p.m. in Jakarta, from 10,900 on Nov. 7, according to data compiled by Bloomberg. It earlier dropped as much as 2.2 percent to 11,150.
“If the rupiah weakens too much, there will an adverse effect on inflation. A weakening rupiah needs to be orderly. BI will always be in the market to maintain the rupiah in the right way,” Hartadi said.
