Slower-than-Expected Growth in 2007?

28 03 2007

Recent statements made by high-ranking Indonesian officials suggest that the Indonesian economy may not grow as briskly as earlier expected. A deeper analysis, however, suggests that the country’s growth momentum remains intact.

In its assessment of Indonesian economic conditions in 2006, the central bank has stated that the quality of the economic growth is deteriorating. This, according to Burhanudin Abdullah the governor of the central bank, can be seen in lower-than-expected economic growth, a rising unemployment rate, and an increase in the number of people who are classified as being “poor”. In 2006, the Indonesian economy grew by 5.5 percent, or lower than the government’s growth target, and even lower than the growth rate of 5.7 percent in 2005. Furthermore, the central bank has implied that economic conditions were not likely to improve in the near term.

Meanwhile, Sri Mulyani the finance minister has also expressed her doubts in regard to the nation’s economic growth prospects for 2007. The minister has even suggested that the Indonesian economy is likely to grow by only around 5.6 to 6.0 percent, or significantly lower than the government’s target of 6.3 percent growth for 2007. According to the minister, slow investment activities may limit the potential growth in 2007. The minister contended that it would not be easy for investment activities to see double digits growth in 2007. Indeed, investment has struggled in recent years. Despite growing by 14.2 percent in 2004, investment only grew by 10.8 percent in 2005 and by a paltry 2.9 percent in 2006. Read the rest of this entry »