Indonesia's economic growth likely to remain strong in 2013

Source:Xinhua Published: 2012-12-26 13:30:23

Indonesia's economic outlook remains positive next year, thanks to a steady domestic consumption, a robust investment climate and the accelerated infrastructure development, media reported here on Wednesday.

Barclays Research predicts that Indonesia's economy, the biggest in Southeast Asia, will expand 6.3 percent in 2013, the same pace as this year's projected growth. Last year it grew 6.5 percent, the fastest pace since 1996.

Among the 10 emerging Asian nations covered by Barclays Research, the country will have the third-fastest economic growth after China and India next year.

Barclay's prediction is below the Indonesia's government forecast of 6.6 percent to 6.8 percent for 2013 after growing 6.5 percent this year.

It is also lower than the projection of the central bank, Bank Indonesia, of 6.6 percent to 6.7 percent for 2013.

Barclays Research, a part of the corporate and investment banking division of Barclays Bank, was less rosy on the global economic growth.

In its economic outlook report sent to clients on December 13, it trimmed its global gross domestic product growth projection for 2013 to 3.3 percent from 3.5 percent a quarter ago. It still maintained its 2012 growth estimate at 3.1 percent.

"Emerging economies have much better growth prospects than those for advanced economies," Barclays Research was quoted by the Jakarta globe as saying.

"They are likely to continue contributing positively to global demand expansion, via incremental fiscal stimulus and monetary easing," it said.

Perry Warjiyo, an executive director for the economy and monetary policy research at the Indonesian central bank, said that increased economic activity ahead of the elections in 2014 will boost economic growth next year.

No official dates have been set by the General Elections Commission (KPU), but the legislative election will take place in the second quarter of 2014 and a presidential vote in subsequent quarters.

Perry said electoral activities will add 0.5 percent and 0.4 percent to economic growth in the third quarter and the fourth quarter of 2013. "Looking at the previous pattern in the 2009 election, parties did spend, buy banners, and mass campaign. This will push the economy," he said.

The World Bank also sees positive impacts to next year's economy from the 2014 election but warned that possible inflation risks need to be balanced with an increase in investment activity.

The Washington-based development bank expects Indonesia's economy to grow 6.3 percent in 2013, faster than its projected growth of 6.1 percent for this year, according to its recent quarterly report.

Bank Indonesia's benchmark policy rate has stayed at a record low 5.75 percent since February, providing room for the consumer sector, including automotive, property and cement to grow faster.

The central bank said at its last monthly policy-setting meeting on December 11 that it is optimistic that inflation for all of 2012 might fall below the bank's mid-point target range of 3.5 percent to 5.5 percent.

The low interest rate environment is likely to continue next year. Barclays Research predicts the rate likely to stay at 5.75 percent until the third quarter of 2013.

Meanwhile, annual inflation eased to 4.32 percent in November, lower than the 4.61 percent rate in October, as food prices eased.

Barclays Research forecasts inflation to hit 5 percent in 2013, picking up from this year's estimated 4.3 percent. Last year, annual inflation was at 5.4 percent.

Per capita income is expected to rise as well, with a boost in the minimum wage raise. In 31 provinces, wages are set to increase by an average 19.8 percent.

On infrastructure, IndoPremier was still upbeat about progress, saying that development is backed not only by the land-clearance law, but also by the availability of financing for the projects.

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