World Bank Raises Indonesia’s Growth Projection

The World Bank continued to be upbeat on Indonesia’s economic prospects, with country head Joachim von Amsberg predicting expanding growth in 2008, despite global economic problems.

Von Amsberg said the bank predicted 6.4% growth next year, just above this year’s expected figure of 6.3% but below the government’s own projection for 2008 of 6.8%.

The prediction is based on stronger inflows of foreign investment to the country, Asia Pulse reported. Growth in investment will hit 10.6% in 2008 from this year's target of 7.7%, while von Amsberg said the country's inflation rate is expected to decline to 6%.

Finance Minister Sri Indrawati Mulyani also played down the effect of external pressures on growth prospects, saying the government hoped to be able to offset any increase in the fuel subsidy caused by higher international oil prices through a combination of higher oil and gas revenue and spending cuts.

The country's budget deficit this year will likely stay within the projected ceiling of Rp58.29 trillion or 1.5% of GDP, she said Tuesday, Thompson Financial reported.

The government was also reported to be considering measures to reduce fuel subsidies, possibly by restricting sales of subsidized fuels to commercial vehicles.

Bank Indonesia (BI) Senior Deputy Governor Miranda Goeltom remained more cautious on growth prospects, saying the bank was concerned over the possible impact of higher oil prices.
But Goeltom told a press conference at an economic seminar in Bali on Thursday that the impact "won't be that big," Dow Jones Newswires reported.

On Tuesday, Bank Indonesia left interest rates on hold, suspending its easing policy for the fourth straight month, partially on concerns that high global oil and commodity prices could stoke domestic inflation in the coming months.

"Like it or not, we will see imported inflation," BI Governor Burhanuddin Abdullah said at the same event Thursday.
The stock market, while buffeted during the week by international trends, ended the week up 2.1% with the Jakarta Stock Exchange composite index at 2,707.67. The rupiah was trading at 9,122/9,128 to the US dollar.
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