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Finance Minister Sees 4% Growth In Q2, Q3
Dion Bisara & Muhamad Al Azahari | June 08, 2009

Construction workers at the Green Palace Apartment development in Kalibata, Jakarta. (Photo: Afriadi Hikmal, JG) Construction workers at the Green Palace Apartment development in Kalibata, Jakarta. (Photo: Afriadi Hikmal, JG)
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Finance Minster Sri Mulyani Indrawati has predicted that the economy would still grow as much as 4 percent year-on-year in the second and third quarters of 2009, partly supported by consumption.

Sri Mulyani, sticking with her recently rosy take on the economy, said that seasonal factors would play an important role in driving consumption in the second and third quarters.

“It’s school vacation season in the second quarter, followed by Ramadan in the third quarter, which should boost household consumption by at least 5 percent,” she said.

Earlier, the minister had echoed local analysts, who cautioned against optimism in the second and third quarters of the year, predicting growth would likely worsen.

Apart from consumption, growth will also be supported by private-sector investment, as confidence in the domestic economy improves, Sri Mulyani said.

She said banks were expected to lower their interest rates in line with the central bank’s cuts to the benchmark BI rate. This may prompt banks to increase lending. The government is also starting to disburse stimulus funds this quarter.

“Taking that all into account, I’m quite confident that Indonesia’s economy will grow by 4 percent at best in the second and third quarter,” Sri Mulyani said.

The International Monetary Fund last week revised Indonesia’s growth to 3 percent to 4 percent this year, from an earlier prediction of 2.5 percent, following surprising 4.4 percent growth in the first quarter.

According to Sri Mulyani, who used to work for the IMF, the lender often underestimated Indonesia, “predicting that global conditions and the general election will impact us heavily.”

Meanwhile, speaking from Bali on the sidelines of a ministerial meeting of 19 agricultural exporting countries, Trade Minister Mari Pangestu said that she expected a drop in the value of the country’s exports this year to be less severe than previously forecast, given signs of an improving global economy.

The value of Indonesia’s total exports, which represent about a third of gross domestic product, is now expected to fall 20 percent this year, against an earlier forecast for a 30 percent decrease, partly due to improving global commodity prices, Pangestu told Reuters.

“We’d been worried it could fall 30 percent,” she said, when asked about the 2009 export outlook.