Indonesia's Economic Growth Expected at 6.1% in Semester I-2013
According to Finance minister Chatib Basri, the Indonesian government expects the country's gross domestic product (GDP) to have grown by 6.1 percent in the first six months of 2013. This forecast falls short of the government's 6.3 percent GDP growth assumption in the state budget (APBN). Basri stated that the lower outcome is due to global factors, such as slowing economic growth in China and India. But the government's assumption is more optimistic than the forecast of the central bank, which expects growth between 5.1 and 5.9 percent.
Amid global economic turmoil, the International Monetary Fund (IMF) recently also downgraded its forecast for economic growth in Indonesia to 5.9 percent. But despite this projected lower performance, it is still expected that Indonesia will post the second-highest economic growth rate in the group of G-20 economies.
Apart from lower demand for Indonesia's commodities, which account for around 60 percent of the country's exports, the possible phasing out of the Federal Reserve's quantitative easing program has weakened the Indonesian rupiah (as well as most other regional currencies) significantly.
Basri expects Indonesia's economic growth in the second half of 2013 to outperform results of the first half. The government is busy preparing new fiscal policies to attract foreign investments. These include new rules in terms of tax allowances and tax holidays, a revision of the negative investment list (which lists industries that are closed to foreign investments), and a simplification of the regulatory framework. However, investments are expected to weaken slightly in Semester II-2013 as the government signaled a slowdown in imports of capital goods in recent months.
Domestic consumption will remain to be the engine of economic growth accounting for about two-thirds of the country's GDP growth, according to Basri.