World Business

Indonesia's economy to grow 6% in Q2: WB

(Xinhua)
Updated: 2010-06-23 14:29

JAKARTA,Indonesia - Indonesia's economy is expected to grow 6 percent year-on-year in the second quarter this year after reaching 5.7 percent in the first quarter and to be approaching 6.5 percent by the fourth quarter, the World Bank said here on Wednesday.

Subham Chaudhuri, chief economist of World Bank's Jakarta office in his presentation of the bank's "June Indonesia Economic Quarterly Report" released here said that the acceleration will see Indonesia's economy expanding by 5.9 percent in 2010 as a whole, 0.3 percentage points more than was projected earlier in the year and by around 6.2 percent in 2011.

"Indonesia's economy continues to consolidate its recovery from the global economic and financial crisis. Slower government spending early in the year slowed growth but private sector demand is likely to continue in supporting activity," said Chaudhuri.

He said that global financial market affected Indonesia in May, but the economy and local financial markets proved robust to sudden and large capital outflows.

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The reports said that even with this market volatility and the uncertainty surrounding developed economies' outlook, Indonesia's economy looks set to continue to strengthen.

Chaudhuri said that growth in domestic demand will drive the overall economy's acceleration.

Besides, he said, the current account will continue to decline as imports growth continues to outpace export growth, led by imports of capital and machinery, thus supporting the robust domestic investment growth and expansion in the economy's capacity.

He also said that inflation is likely to continue rising on higher lending, demand and commodity prices.

"But, rising power tariffs will have small impact," said the report, referring the government's decision to raise power tariff starting on July 1.

Chaudhuri also said that government revenue may be larger and deficit smaller than expected.

"Government spending was weak early in the year, while growth in economy-wide prices may be faster than expected, lifting revenues," he said.