RI economy to grow 6 percent in 2007, says ADB

Jakarta (ANTARA News) - The Asian Development Bank (ADB) predicts that government expenditures and investment will boost Indonesia`s economic growth to 6 percent in 2007 and 6.3 percent in 2008.

"It is expected that the lowering of bank interest rates will fuel investment and consumption growth," Edgar A Cua, ADB representative in Indonesia, said here on Tuesday.

Edgar A Cua made the remarks when he presented his report on the Asian Development Projection 2007.

He said that the Indonesian government should finish its reforms agenda in the coming six months and carry out infrastructure projects to attract investments.

The ADB representative also suggested that the government accomplish its unfinished regulations because in 2008 the focus of business makers would shift to the political sector in the run-up to the 2009 general elections.

The government should pay attention to legal certainty, regulations and transparency in order to attract investment, he said.

He said that the adoption of an investment law would not automatically attract foreign investment because its executing regulations must be prepared first.

In the meantime, ADB`s project officer for small- and medium- scale businesses, Hari Purnomo, said that the ADB had projected Indonesia`s inflation rate at 6.2 percent in 2007 and at 6.2 percent in 2008.

This is on condition that the government would provide subsidy for electricity and consistently maintain a moderate level in food prices, particularly in the rice price.

He said gross capital investments would grow 25-27 percent of the Gross Domestic Product (GDP) or an increase by about 9 percent from the figure last year.

Export performance which greatly contributed to economic growth in 2006, would increase slighly in 2007 from 9.2 percent in 2006 to 10 percent in 2007.

He said the slight increase would mainly be due to slower growth in several export markets.

"Import performance is expected to follow developments in investment," Purnomo said.