RI'S 2007 ECONOMIC GROWTH LIKELY TO REACH TARGET

By Andi Abdussalam

Jakarta, Dec 22 (ANTARA) - Against the pessimism voiced by economic observers early this year over the government's economic projection, Indonesia is likely to reach its economic growth target of 6.3 percent for 2007.         According to the Central Board of Statistics (BPS), the Indonesian economy up to September grew by 6.3 percent based on the calendar year, or 6.5 percent based on year-on-year growth, exceeding the government's economic growth projection of 6.3 percent for 2007.         Last January, economic observers and bankers expressed the belief that Indonesia's economy in 2007 would perform better than last year's when it recorded a growth of 5.5 percent. But they doubted the validity of the government's economic growth projection of 6.3 percent for 2007.         Representative of the International Monetary Fund (IMF) in Indonesia, Stephen Schwartz said that the government's target of 6.3 percent was an 'ambitious' one, though he was sure it could be achieved if the government was able to improve the investment climate and carry out infrastructure program well.         Economic analyst Aviliani of the Indonesian Revival Team (TIB) shared Schwartz's view saying the 6.3-percent target was difficult to achieve as the government still had little commitment to improving infrastructure and the investment climate. The government only set Rp100 trillion for infrastructure development.         Economic growth can be stimulated only if new infrastructure programs are carried out. Aviliani predicted that the economy would grow by between 5.6 and 5.7 percent if infrastructure development did not run well. In order to achieve a target of 6.3 percent, the government should set aside Rp300 trillion for infrastructure development.         Relatively optimistic voice was aired by Bank Indonesia (BI) Governor Burhanuddin Abdullah who predicted that the country's economy would grow by about six percent in 2007.         Comparing the country's economic growth in 2006, Abdullah said at that time that 2007 would be a promising year. BI predicted that Indonesia's economy would grow by around six percent based on moderate assumption. He said that optimistic assumption would predict a growth at 6.3-percent and pessimistic one at 5.7 percent.         In the first half of 2007, however, the government failed to achieve its target, when the economy only grew by 6.03 percent. This prompted the House of Representatives (DPR) to ask the government to revise its 2007 growth target from 6.3 percent to 6.1 percent.         Convinced with the economic growth which hit six-month highs in June that brought the figure in the second quarter at a range of 6-6.11 percent from 5.97 percent in the first quarter, the government remained upbeat the 2007 target would be achieved..         "This is very convincing and provides a conducive climate," Anggito Abimanyu, head of the finance ministry`s fiscal policy board, said.         With the economy expanding in the range of 6-6.1 percent in the second quarter, the government is optimistic about the economy growing by 6.3 percent as projected, he said.         Unlike the government, the House of Representatives was less optimistic with the economic growth in the second semester of 2007. In a debate on a revised 2007 state budget, the House suggested that the economic growth for 2007 should be set at 6.1 percent, lower than the previous target set by the government at 6.3 percent.         After tough and heated debates, however, the government and the House were finally able to agree on the figures of the economic growth assumption in the revised 2007 state budget. They agreed that the economy would expand in the range of 6.1-6.4 percent this year.         "If the DPR wants a pessimistic growth rate of 6.1 percent, the upper growth rate should be raised to 6.4 percent. The range of 6.1-6.4 percent accommodates both the optimistic and pessimistic growth rates," Finance Minister Sri Mulyani said.         The finance minister said with the economy estimated to have grown in the range of 6-6.11 percent in the second quarter, the economic growth rates in the third and fourth quarters were likely to reach 6.3 percent and 6.5 percent respectively.         "The third and fourth quarter growth is to be driven by high government spending, investment, export and household consumption -- the prime engine of growth," she said in July.         The Indonesian economy in the third quarter of 2007 grew by 3.9 percent, bringing the calendar year growth to 6.3 percent and the year-on-year growth to 6.5 percent, the BPS said.         The economic growth was mainly driven by the agricultural sector which expanded 10.2 percent, BPS Chief Rusman Heriawan last month.         "The GDP growth, exclusive of oil and gas, in the year to Sept 30 was 6.8 percent, or higher than the overall GDP growth which reached 6.3 percent. This is something normal as the growth of oil lifting and so forth usually goes downward," he said.         The GDP in the first nine months of 2007 totaled Rp2,901.3 trillion, raising the hope that the GDP would reach Rp4,000 trillion by the end of 2007, he said.         Household consumption contributed 5.3 percent to the year-on-year growth, government consumption 6.5 percent, gross fixed capital formation 8.8 percent and exports 7.8 percent. (A014/A/HAJM/B003) 2. 22:40. (T.A014/A/A014/B003) 23-12-2007 00:20:55