Indonesian Economy Performing Well: ADB

Jakarta Globe, September 14, 2011

The Asian Development Bank on Wednesday upped Indonesia’s forecast
for economic growth from its April outlook while inflation forecasts were
 trimmed for 2011 and 2012. (AP Photo/File) 

Related articles

• Goldman, Morgan in Talks to Buy Indonesian Brokers: Sources
• Doubts Linger Over Impact of New Tax Holiday Scheme
• Indonesia to Require Exporters to Return Earnings
• New BI Forex Rule Is No Cause For Alarm: Analysts
• Economy: Bank Indonesia Keeps Key Rate Steady for Growth

Hong Kong. The Asian Development Bank is trimming its forecast for economic growth in developing Asian countries because of worries about weak demand from key trading partners including the US and Europe.

The ADB said on Wednesday that it is lowering its 2011 growth forecast slightly to 7.5 percent from 7.8 percent previously for 45 Asian countries.

The bank is also cutting its 2012 forecast to 7.5 percent from 7.7 percent.

The Manila-based lender said the slowdown in demand from the United States and Europe “continues to cast a cloud over the region,” with export growth easing off in the second quarter.

Inflation also remains a “threat,” with consumer price inflation predicted to average 5.8 percent this year before cooling off to 4.6 percent in 2012.

Indonesia’s forecast for economic growth was upped from ADB’s April outlook while inflation forecasts were trimmed for 2011 and 2012.

The economic growth rate increased to 6.5 percent in the first half of the year due to “stronger investment, private consumption and robust exports.”

Inflation decreased from 7 percent in January 2011 to 4.8 percent in August.

Growing employment in Indonesia contributed to a 4.5 percent rise in private consumption. The unemployment rate fell to 6.8 percent from 7.4 percent from a year earlier. However, job creation, especially for workers between 15 and 24, is still a challenge.

“About 18 percent of the young people who had joined the workforce by August 2010 were unemployed, or six times as high as the rest of the workforce,” the report said.

Despite the growing number of imports, net exports expanded. It is forecast that 15 percent of the government’s total expenditure will be spent on subsidies for electricity and fuel.

Indonesia saw its best performance in five years with manufacturing output expanding by 5.6 percent with textiles, iron and steel leading the increase. While foreign direct investment inflows were the highest in 10 years at $10 billion.

The report concluded that, “Taking these factors into consideration, the forecasts for GDP growth are raised slightly from April to 6.6 percent this year, and to 6.8 percent for 2012 based on the improving outlook for investment next year.”

AP, JG