RI economy to grow by 6 pct as real sector begins to move, observer says

Jakarta (Antara News) - The macro economy of Indonesia was predicted to grow by six percent in 2007 as the real sector had begun to move and the national banks have actively distributed credits to customers, an observer said.

The expected growth rate of six percent is below the govenment`s target of 6.2 percent as there were a number of obstructing factors, an economic observer from the Standard Chartered Bank, Fauzi Ichsan, said here Tuesday.

The economy would only grow by six percent because the government was not ready to overcome a number of problems like the limited state budget, the low rate of building infrastructure and the long time before the implementation of ifrastructure, he noted.

If those problems could be settled well, Indonesia`s macro economic condition would be better, he said, adding that the micro economic problems in the country had not been handled properly.

According to Fauzi, the government should now focus on efforts to boost the real sector in a bid to reach the projected economic growth of six percent.

The year 2007 would be the early progress of Indonesia`s economy as the current moment should be used as well as possible, because the Asian economic giant, China, was ready to invest in its own home, he said.

He pointed out that the economic growth was now only supported by the consumption sector and the improvement of the banking performance with the decrease in the credit interest rates due to the drop in Bank Indonesia (BI) interest rate and the insurance interest of 9.75 percent.

The BI interest was predicted to reach 9 percent by the end of the year and credit interest rates would be around 14-15 percent, he said.

On China`s rapid growth, he said that country has been open and developing its businesses actively by exporting its products to different countries and receiving new investments from other countries.

China`s economy rapidly grew by more than 10 percent making the country to control many products on the world market so that other countries feared for the flow of Chinese products to the international market, he said.

Fifteen years ago, China was closed and received no information and technology from other counries but it is now making extraordinary progress far beyond other Asian countries except India.

On the banking sector, he said the banks would next year distribute about 20 percent of their credits (before only 10-15 percent) in line with the increasing demands from the customers for bank credits.

Debtors have begun actively asking for credits as their business prospects seemed to be brighter although the interest rate was considered still high and they called for a decrease in the credit interest rate, he said.

He further said if the bank credit interest rate reached between 12-13 percent in 2007, the requests for for credits would drastically increase.

The interest rate between 12 and 13 percent was competitive enough to give an opportunity to debtors to run new businesses as they were expected to control their credits well, he said.(*)
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