BI predicts consumption, investment to be drivers of growth
Wed, May 16 2012 19:55 | 1197 Views
Jakarta (ANTARA News) - Bank Indonesia has predicted domestic demand, boosted by strong consumption, and increased investment will be the drivers of the country`s economic growth this year.
Government consumption is estimated to grow 5.7 to 6.1 percent.
In its report on economic prospects for 2012, received here on Wednesday, BI said there would be increased consumption in the household and the government sectors, while investments would continue to rise because of the favorable economic climate.
In view of that, BI added, Indonesia`s economy would grow 6.3 to 6.7 percent despite the current global economic slowdown.
The central bank has projected household consumption to grow between 4.7 and 5.1 percent, as the real income of the public is expected to rise in light of civil servants` pay raise and higher wages for workers.
According to the report, higher purchasing power, consumer optimism, low household debt, and relatively low rates of interest will also help boost household consumption.
Meanwhile, government consumption is estimated to grow 5.7 to 6.1 percent. BI said fiscal deficit in 2012 will be kept in check to maintain the country's economic stability.
BI said investment would grow 9.6 to 10.1 percent as mid-term economic prospects were strong and domestic market remained attractive for investment.
It added the investment climate had also improved owing to infrastructure development as well as regulations that helped promote investment growth amid the current global economic uncertainties.
BI noted the increase in capital spending and foreign direct investment was also expected to have an impact on infrastructure growth, which was still lagging behind.
Exports are predicted to slow down this year as the global economy has not yet shown improvement. However, the growth in the sector will still be 10.6 to 11.1 percent.
According to the report, optimism in the sector remains because of its diversified export destinations, such as the emerging markets of China and India, which align their economic growth with domestic demand.
Indonesia`s exports to those countries such as energy and agricultural products are used to meet their domestic needs and, therefore, are not so vulnerable to global economic turbulence.
The sector also benefits from low interest rate and controlled inflation in the country.
However, BI stated imports of goods and services might still reach 11.6 to 12.0 percent thanks to increasing though limited domestic demand and consumption.
Investment in infrastructure development would increase imports of heavy transportation equipment, it added.
Editor: Priyambodo RH
COPYRIGHT © 2012