IMF Sees Indonesia’s 2007 GDP Growth above 6%

JAKARTA ~ The International Monetary Fund (IMF) expects Indonesia’s gross domestic product (GDP) growth this year to beat its initial projection of 6 percent, given strong exports and rising levels of direct investment, its country representative said this week.

“Our (initial) projection was 6 percent. Based on recent trends, we do see some upside potential, in particular as a result of the strong export growth and if investment picks up faster than our baseline projection in the second half,” Stephen Schwartz told a panel discussion on Tuesday.

“I think the government’s more ambitious target of 6.3 percent should be achievable,” he said.

First-quarter growth clocked in at 6 percent and Indonesia is expecting its fastest full-year growth this year in more than a decade.

Schwartz said he expected Southeast Asia’s largest economy to grow at 6.5 to 7 percent over the next few years, supported by rising exports and investments, and lower inflation levels.

He said he expected consumer price inflation to “finish well within Bank Indonesia’s range of 5 to 7 percent this year.”

Benign inflation and a downward trend in the central bank’s benchmark interest rate, which currently stands at 8.25 percent, were positive signs for the economy, he said.

“Lower inflation is an encouraging development because it will stimulate corporates to borrow more and boost consumer sector growth,” he said.

The central bank has trimmed its key BI rate by a total of 450 basis points since May 2006.

Interest rates were originally hiked dramatically when the government made the politically sensitive decision to cut spiralling fuel subsidies in 2005.

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