Jakarta - Indonesia`s economy will grow at a slower rate in the next two years, after reaching a peak since the Asian financial crisis in 1997, the Asian Development Bank (ADB) said.
In its main annual report, dubbed the Asian Development Outlook (ADO) issued in Jakarta on Wednesday, the bank predicted that the Indonesian economy would grow by six per cent in 2008 and by 6.2 per cent in 2009, down from 6.3 per cent in 2007.
The economic growth would mainly be fueled by household consumption, with the support of the impact of a decline in interest rates.
Private investment is likely go up as a result of the business community`s response to declining interest rates and a better investment climate, according to the ADB.
But growth in public sector investment and development spendings would be limited because of a rise in subsidies.
The ADB also estimated that the inflation rate would rise to 6.8 per cent in 2008 from 6.4 per cent in 2007, because of domestic demand and high global food prices.
According to the bank, the inflation rate would drop to 6.5 per cent in 2009 as a result of declining world food prices.
In the meantime, growth in exports was expected to slow in 2008 and 2009, owing to declining global demand and a slight decrease in the prices of international commodities.
Although around 50 per cent of Indonesia`s non-oil/non-gas exports flowed to Asian markets outside Japan, an economic slowdown in industrial countries would indirectly cause losses in exports, because some of the goods consist of unfinished products which had to be processed into finished products for markets in industrial countries.
On the other hand, growth in imports was estimated to remain high, following high domestic demand.
Various developments in trade would be accompanied by a high deficit in the balance of revenue and services.
Consequently, the surplus in the balance would go down to 1.9 pe rcent in 2008 and 1.6 per cent in 2009.
The ADB also noted that the Indonesian government was still committed to implementing its agenda of reforms in a bid to improve the investment climate and public services.
Though the world was still confronted with many steps to reduce the cost in business activities in Indonesia, the government had also launched a national program for community empowerment in 2007 to improve the management of services at sub district and village level.
Source: au.news.yahoo.com (4 April 2008)