Indonesia expects faster economic growth

Indonesia's President Susilo Bambang Yudhoyono speaks in front of parliament members ahead of the Indonesia Independence Day anniversary at parliament building in Jakarta August 16, 2012. [Photo/Agencies]

JAKARTA - Indonesian President Susilo Bambang Yudhoyono said on Thursday said that the government forecast the economy to accelerate faster and state budget deficit to be lower next year.

President Yudhoyono said that the Gross Domestic Product was expected to expand by 6.8 percent next year, faster than this year's target of 6.3 percent to 6.5 percent while state budget deficit was expected to decrease to 1.6 percent of the GDP in 2013 from that of this year's expectation of 2.23 percent of the GDP.

Indonesia's growing investment, which has started taking a lead in contributing on growth since the second quarter, followed by huge consumption, supported by growing middle class group, had make up decline on exports, said Yudhoyono.

Investment grew by 11.2 percent in the first semester, following the second credit rating upgrade to investment grade by Moody's on January 18, the president said.

The amount of the state budget was expected to increase to 1,567.9 trillion rupiah (some $165.112 billion) next year, said Yudhoyono.

Inflation was assumed at 4.9 percent next year, central bank interest rate for three months at 5 percent and rupiah value against $1 at 9,300, oil lifting (ready for sale) at 900,000 barrel per day, Indonesian crude oil price at $100 a barrel and gas lifting at 1.35 million barrels per day equivalent oil, he said.

Nevertheless, the president said that the government would keep on alert over the external pressure as the settlement of the crisis in Europe remains uncertain.

"Coordination with among the government and monetary authority will be intensified to face the various pressure that may come," Yudhoyono told lawmakers at his speech over the assumption of the state budget in 2013 at the parliament building on Thursday evening.

By July 2012, rupiah had decreased by 6.04 percent on yearly basis with an average value against the dollar was at 9,241, he said.

But, the country's foreign exchange reserve reached at $106.56 billion at the end of July, equivalent with 5.8 months imports and payment of foreign debts.

The central bank kept the interest rate unchanged at 5.75 percent since March. By July this year, banking credit had expanded by 25.7 percent on yearly basis with non performing loan at safe level, indicating a strong support of the sector on the growth, he said.

Inflation this year was expected to be no more than 4.8 percent, said Yudhoyono.

Standby loans had also been secured from multilateral forum, he said, but he did not elaborate further.

"With the measures and the experience in addressing economic crisis in 2008, hopefully we are going to be able to secure national economy from the global economic risks and financial volatility," he said.

President Yudhoyono said that Indonesia expected to reduce unemployment to 5.8 percent to 6.1 percent next year, and poverty to 9.5 percent to 10.5 percent.

Debt to GDP ratio was expected to decrease to 23.4 percent next year from this year's level of around 25 percent, he said.