Bangkok (UN Information Services) – Indonesia’s economic growth is expected to remain strong in 2008 driven on by both private consumption and higher investment, while inflation will remain at lower levels set in 2007, according to the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
In its Economic and Social Survey of Asia and the Pacific 2008, ESCAP said Indonesia’s growth rate is expected to be 6.2 per cent in 2008, steady from the level set in 2007 and up from 5.5 per cent in 2006. In 2007 gross fixed investment tripled in its growth rate to 8.9 per cent in 2007 from 2.9 per cent a year earlier.
The strong performance of domestic demand, which grew by 5.1 per cent in 2007 from 3.7 per cent in 2006, “more than compensated for a small drop in the rate of growth of exports,” to 8.7 per cent in 2007 from 9.2 per cent in 2006.
The positive growth came even as inflation was reported substantially lower at 6.4 per cent in 2007 from 13.1 per cent in 2006. But higher prices pressures were reported for foodstuffs (11.4 per cent) and education, recreation and sports (8.7 per cent).
As the inflation rate lowered, the Bank of Indonesia cut its benchmark interest rate on seven occasions to a low of eight per cent at year’s end.
Official interest rates have remained steady in early 2008 with the central bank arguing higher prices from oil and food commodities are likely to be counter-balanced by “the potential adverse effect on Indonesian exports of a United States recession,” ESCAP said.
In payments and trade, Indonesia reported an increase in its current account surplus to US$11.5 billion in 2007, from US$9.9 billion in 2006. The goods trade surplus rose by US$4.0 billion, compensating for increased deficits in services trade of US$0.9 billion and the income account of US$1.6 billion.
Indonesia’s trade and payments accounts have also benefited from higher prices of oil and gas and for agricultural commodities such as coal, cocoa, and palm oil. This in turn has helped increase the terms of trade by 3.4 per cent.
ESCAP noted that the signing of the bilateral trade agreement between Indonesia and Japan pointed to a deepening of regional integration in East and South East Asia, with the pact including provisions for energy security as well as the removal of tariffs on more than 90 per cent of the value of bilateral trade.
Further information on the Survey can be found at:
For more information, please contact:
Hak-Fan Lau, UN Information Services, ESCAP
Tel.: +66-2-288-1866, Mob.: +66-84700-1147
Ari Gaitanis, UN Information Services, ESCAP
Tel.: +66-2-288-1862, Fax: +66-2-288-1052