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Europe Problems Hit Indonesia’s Economic Growth Forecast
Dion Bisara | February 15, 2012

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The president may be confident that Indonesia can achieve 6.7 percent growth this year, but the Finance Ministry appears less certain, on Tuesday lowering its growth forecast to reflect the likely impact of the euro zone’s sovereign debt crisis and the global slowdown.

Deputy Finance Minister Anny Ratnawati said the ministry was cutting its estimate to the 6.5 percent to 6.6 percent range, from the forecast of 6.7 percent set in the state budget in October.  

“We have to consider the global economic situation and the euro zone crisis,” Anny said. 

The move came a day after President Susilo Bambang Yudhoyono aired optimism that the 6.7 percent target would be met this year. Analysts and economists in Jakarta have warned that demand from the euro zone and the United States for Indonesian commodities may slow this year, affecting the country’s economic growth.

International financial institutions have recently revised down their forecasts for Indonesia’s economy this year.

The Manila-based Asian Development Bank, whose mission is to boost development and eradicate poverty in the region, reduced its forecast last month to 6.4 percent from 6.8 percent, citing Europe’s debt crisis.

Bank Indonesia cut its 2012 economic growth forecast to 6.3 percent from its original forecast of 6.7 percent. 

The economy expanded 6.5 percent last year, putting it ahead of emerging-economy peers such as Malaysia and Thailand.

It was also the fastest pace of growth since 1996. Although the nation’s heavy reliance on domestic consumption has made it more resilient to global economic volatility, Indonesia has begun to see signs of weakening exports.

Export growth in December slowed to 2.2 percent from a year earlier after gaining 10.2 percent in November, Central Statistics Agency (BPS) data showed.  Finance Minister Agus Martowardojo on Tuesday expressed concern about rising world crude oil prices and the possibility that Indonesia may miss its oil production target of 950,000 barrels per day this year.