RI economy to remain robust in third quarter

Aditya Suharmoko, The Jakarta Post 

The Indonesian economy is estimated to grow by more than 6 percent during the year's third quarter on the back of robust private consumption, investment and export, the Finance Ministry says. 

Private consumption, especially in consumer goods, between July and September "remained strong", the Finance Ministry head of fiscal policy, Anggito Abimanyu, said Wednesday. 

"Growth in consumer goods was relatively high. Exports were also on track although imports were relatively high," Anggito said. 

The Finance Ministry will provide an exact figure Monday, he said. 

Southeast Asia's biggest economy has seen car and motorcycle sales grow at the fastest pace since the 1997 Asian financial crisis, as commodity boom makes people living in plantation and mining areas wealthier. 

The number of motorcycle sales is often used to gauge the purchasing power of middle to lower-income people, while car sales gauge that of the middle to upper-income bracket. 

Cement consumption, also a standard of living indicator, remained resilient despite higher construction costs, showing 16 percent growth to 25.6 million tons in the first eight months of 2008 compared to the same period last year. 

During the first half of the year, the economy unexpectedly grew 6.4 percent due to strong exports, particularly commodities, according to the Central Statistics Agency (BPS). 

Analysts, however, warned that the decline in global oil prices might undermine export growth in the coming months and affect the country's economy in general because mining and agricultural commodity prices are tailing oil prices. 

Crude oil fell US$2.51, or 2.6 percent, Thursday to $96.02 per barrel in New York, while it was at $96.60 per barrel in London, Bloomberg reported. 

Oil has fallen 35 percent after reaching a record $147.27 in July because of fear the global financial crisis will spread through the economy, weakening energy demand. 

Analysts have predicted that the Indonesian economy will grow by slightly less than 6 percent by the year's end, below the government's expectation of 6.2 percent. 

BPS chairman Rusman Heriawan said the country's economy in the third quarter of 2008 was likely be a bit below the 6.4 percent growth recorded in the second quarter of the year. 

"During the fasting month (September), growth in trade sector was up," Rusman said. "However, inflation might soar too." 

Rusman said inflation in September might accelerate between 0.4 percent and 1 percent as demand jumped during the Islamic fasting month of Ramadhan and Idul Fitri holidays. 

The government has expected September inflation to reach below 0.8 percent as recorded in the same period last year. 

"If in the last three months (of 2008), the inflation is similar to that in September, the 11.4 percent inflation target could be achieved," he said. 

The government has worked hard to ensure inflation, as the main culprit undermining the economy, be kept below 11.4 percent. 

Between January and August, inflation reached 9.4 percent, BPS reported. Year-on-year inflation, meanwhile, stood at 11.85 percent. 

Higher inflation will prompt higher interest rates, leading to increased borrowing costs for the corporate sector wanting to expand or for new investors starting up new businesses. 

Rusman said the government should ensure food supply went accordingly if it wanted to maintain inflation according to its target.