Jakarta, Jun 22, 2010 – The June Indonesia Economic Quarterly released today by the World Bank reports that Indonesia’s economy continued 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 to support activity.
- Volatile global financial markets affected Indonesia in May, but the economy and local financial markets proved robust to sudden and large capital outflows. The Quarterly reports that even with this market volatility and the uncertainty surrounding developed economies’ outlooks, Indonesia’s economy looks set to continue to strengthen::
- Growth in domestic demand will drive the overall economy’s acceleration.
- The current account will continue to decline as imports growth continues to outpace export growth, led by imports of capital and machinery imports, supporting the robust domestic investment growth and expansion in the economy’s capacity.
- Inflation is likely to continue to rise on higher lending, demand and commodity prices. Making electricity tariffs better reflect the cost of power will have a very small impact.
- Government revenues may be larger, and the 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.
“The economy is expected to gradually accelerate through 2011, largely due to domestic demand. The renewed volatility in global financial conditions and uncertain developed economy outlook has increased the near-term downside risks to forecasts” said Enrique Blanco Armas, World Bank Senior Economist for Indonesia. “In the long term, raising Indonesia’s growth rates above 7 percent by mid-decade requires fulfilling the ambitious reform agenda outlined in the RPJMN 2010-14”.