RI'S ECONOMIC GROWTH RATE PREDICTIONS

by Andi Abdussalam

Jakarta, Dec 11 (ANTARA) - Uncertain global economic conditions which are expected to still take place next year have caused many sides to predict different growth rates for Indonesia's economy in 2012.          Bank Indonesia (BI/the central bank) which has initially set a projection of 6.7 percent -- similar to that of the government-- for Indonesia's economic growth in 2012 has recently revised it down. It revised down its forecast on the country's economic growth to below 6.5 percent in 2012 due to a worsening of the economic crisis in Europe.          "Following the decline in the global economy and commodity prices, economic growth will tend to drop to below 6.5 percent while  inflation in 2012 will also  be lower than the forecast of 4.7 percent," the director of BI's directorate of economic research and monetary policy, Perry Warjiyo, said     As the European economic crisis had shown no sign of abating Bank Indonesia had to prepare various policies to address the crisis particularly its impact on the financial market, he said.          "BI will make various adjustments by issuing a combination of policies based on not only inflation forecast but also developments in the European economic crisis by observing developments in exchange rates, interest rates and capital inflows," he said.          His colleagues, Difi A Johansyah who is a BI spokesman, said the world's economic slowdown is estimated to begin affecting Indonesia's economic growth in 2012 so that its economic growth would be at a range of between 6.3 percent and 6.7 percent.          Difi said  that the world's economic growth is predicted to slow down due to uncertainty in the settlement of sovereign debt and fiscal problems in Europe and the US.     In 2013 however the country's economy is predicted to grow between 6.4 percent and 6.8 percent in line with improving world economic conditions, he said when explaining the results of a BI board of governors' meeting.          About BI's projection on the country's economic growth, BI Governor Darmin Nasution  shared Difi's prediction, saying it was expected to be at between 6.3 percent and  6.7 percent or slightly lower than that in 2011. This was due to the slowing down of the global economy.          In order to maintain national economic growth momentum, the bases of the domestic economic growth should be further reinforced, he said. The central bank governor said that the lowering of BI's benchmark rate to 6 percent in October would revive domestic financing sources, particularly banks.          Darmin said that with the prediction of economic growth about 6.3 percent - 6.7 percent, BI estimated the need for minimal financing at Rp598 trillion or equal to the growth rate of credits at 26.9 percent. "Next year, credit growth is expected to reach 24 - 25 percent.          According to the BI governor, investment which in 2011 recorded a growth of 7.7 percent, was expected to experience an increased growth of about 9.7 percent -  10.1 percent in 2012 which in turn would maintain the people's purchasing power. It would also be able to maintain household consumption level at 4.7 percent - 5.1 percent.          In the meantime, the Asian Development Bank (ADB) has also revised down its prediction of Indonesia's economic growth in 2012 from 6.8 percent to 6.5 percent.         However, if the European crisis continued to worsen, the ADB  predicted Indonesia's economic growth at 6.3 percent. This projection rate is similar to that of the World Bank which also put its prediction of Indonesia's economic growth in 2012 at 6.3 percent.          Even it could be lower than that (6.3 percent) if the crisis falls into a deep recession. "If the euro zone and the United States still fall into a deep recession the ADB predicts the Indonesian economic growth will drop further by 1.0 percent to 5.5 percent," Head of the ADB Regional Economic Integration Office Iwan Jaya Aziz said in a latest Asian Economic Monitor report released this week.          The low economic prediction was also made by Bank Mandiri chief economist Destry Damayanti, who said that the Indonesian economic growth next year would  decline from the government's target of 6.7 percent to stay at a level of 6.2 percent in 2012.          To maintain high economic growth the government should increase public income, keep down inflation to increase the people's purchasing power, create more jobs to reduce unemployment rate and ensure the supply of goods, she said.          Optimism was voiced by legislator Kemal Aziz Stamboel of Commission XI of the House of Representatives (DPR) on financial affairs.  He said that although the world economic crisis and recession were deepening at an increasingly worrying pace, Indonesia would still be able to achieve its economic growth targets both in 2011 and 2012.          "Indonesia still has domestic driven sources to achieve its economic targets. Besides its domestic-driven economy, Indonesia's domestic consumption, investment and effective fiscal policy will also drive Indonesia's economy to achieve its growth targets," Kemal Aziz Stamboel said.          Though he said the government would still be able to achieve its growth targets, yet he did not mention any figures.  In the 2011 and 2012 state budgets  economic growth was respectively set at 6.5 percent and 6.7 percent.         "Various projections are based on a number of assumptions from worsening global crisis which is believed to have impact on Indonesia, such as the slowing down of exports and the tightening of the liquidity sector," the legislator said.           So, he said, if these problems could be anticipated as early as possible with proper polices, the projections could be on the other way around.          "Therefore, the government should design a policy to encourage exports with diversified markets and product innovation, boost investment and maintain a stable liquidity sector," the legislator said.***5*** (T.A014/A/H-NG/18:30 /a014 )11-12-2011 19:14:1