Indonesia’s central bank raised its 2011 economic growth forecast to as much as 6.5 percent from an earlier forecast of as much as 6 percent as consumer spending accelerates, deputy Governor Hartadi A. Sarwono said.
Gross domestic product may increase by between 6 percent and 6.5 percent next year, Sarwono said in a statement posted on Bank Indonesia’s Web site late yesterday. The central bank earlier this week raised its estimate for 2010 growth to 5.6 percent from 5.2 percent.
Asian economies from China to Vietnam are picking up speed after policy makers boosted spending and slashed borrowing costs to counter the global recession. Indonesia fared better than its neighbours during last year’s world slump because it relies less on exports, and consumer confidence has been buoyed by the most stable political climate since the 1998 ousting of ex-dictator Suharto. The country’s economy expanded 4.5 percent last year.
“Private consumption is forecast to grow higher in the first quarter,” Bank Indonesia said in a March 5 statement on its Web site. Private consumption accounts for about 68 percent of Southeast Asia’s largest economy.
PT Bank Mandiri, Indonesia’s largest lender by assets, yesterday posted profit of 6.72 trillion rupiah ($731 million) for 2009.
Profit at Indonesian banks such as Mandiri rose as loan demand by consumers and companies remained high, said Joseph Pangaribuan, an analyst at PT Samuel Sekuritas Indonesia in Jakarta. Indonesia’s economy grew 5.4 percent in the fourth quarter.
The Jakarta benchmark stock index increased 87 percent last year and the rupiah gained 16 percent, the best performance by an Asian currency outside Japan, as foreign funds sought to take advantage of Indonesia’s strengthening economy.
Indonesia’s inflation rate may average between 4 percent and 6 percent this year compared with an average 2.78 percent in 2009, the central bank has said.
The bank cut its benchmark interest rate by 3 percentage points between December 2008 and August last year to shield the nation from the global recession. The policy rate has since been maintained at 6.5 percent.
Growth in Indonesia’s $514 billion economy has been supported by improved consumer confidence, which according to a central bank index rose in January to near the five-year high recorded in July 2009 when President Susilo Bambang Yudhoyono was elected to a second term.
Yudhoyono, 60, has pledged to double spending on roads, seaports and airports to $140 billion over the next five years, part of his push to deliver economic growth of at least 6.6 percent by the end of 2014.
Even so, Indonesia overtook Cambodia as the most corrupt country in the Asia-Pacific region in the eyes of business executives, according to an annual survey by Hong Kong-based Political & Economic Risk Consultancy Ltd
“The perception that corruption is especially bad in Indonesia will make it more difficult for the country to attract foreign direct investment,” the PERC report said. It noted that “the absolute level of corruption in Indonesia might not be any worse than in any other Asian country.”