Indonesia`s economy growing faster than expected

Tuesday, 11 August 2009

ANTARA News Agency

Despite the impact of the global economic crisis, Indonesia`s economy in the second quarter of this year was able to grow at a rate higher than the figure projected by the government.

"We initially expected that amid the global economic crisis, our economic growth would reach 3.7 percent only. So, if it now stands at 4.0 percent it means that our economy is growing faster than our initial projection," Finance Minister Sri Mulyani Indrawati said on Tuesday.

The Central Bureau of Statistics (BPS) announced on Monday that Indonesia`s economic growth in the first semester of this year was recorded at 4.2 percent.

According to the finance minister, household and government`s consumption constituted the biggest contributors to the economic growth in the second quarter of 2009, while investments, exports and imports still played less significant roles.

"We still have to pay attention to investment whose growth is still relatively low compared with that in 2008. The contributions of exports and imports were also still small. There was even a downward trend," the minister said.

"But there have been signs of improvement now so that in the second semester, I believe, the contribution to the economic growth of our exports and imports will improve," the finance minister said.

The central bureau of statistics recorded that Indonesia`s economic growth in the first semester of this year reached 4.2 percent. This figure is actually still within the government`s target.

"The economic growth figure is still within the range set by the government at between 4.0 and 4.5 percent for the first semester of this year," BPS chief Rusman Heriawan said at his office on Monday.

With its economic growth in the first semester of this year, Indonesia is included in the group of countries which gained positive economic growth amid the global economic contraction.

"Countries in the world are experiencing economic contraction, except a number of nations with large economic scales such as China and India which recorded an economic growth of 7.5 percent and 5.4 percent respectively," Rusman Heriawan said.

Actually, there could also be other countries which experienced positive economic growth. "There could be other countries whose economies also experience positive growth but their economic scale is small so that it is `unseen in the world map`, or it does not play a significant role in the context of the world economic forces," he said.

In the second quarter of 2009, Indonesia`s economic growth reached 2.3 percent compared with that in the same period a year earlier. If compared with the second quarter of 2008, Indonesia`s economic growth in the second quarter of 2009 reached 4.0 percent.

"The real figure is 3.99 percent but we round it off to 4.0 percent," the BPS chief said. Rusman Heriawan said that on a cumulative basis, Indonesia`s economic growth in the first semester of 2009 reached 4.2 percent if compared with that in the first semester of 2008. The statistics official said the economic slow-down in the first semester of 2009 was worse than that in the same period in 2008.

"Economic growth in the first semester of 2009 stood at 4.2 percent compared with 6.3 percent in the corresponding period in 2008. So, while we recorded positive growth in the first half of this year, we also experienced a slowdown," he said.

The BPS chief said the contributors to the economic growth in the second quarter of 2009 consisted of various sectors.

"The biggest contribution came from the transportation and communication sectors which accounted for 1.4 percent of the 4.0 percent economic growth. Cellular phone is the biggest contributor in the communication sector," Rusman Heriawan said.

Other sectors included services 0.7 percent, finance 0.5 percent, industry 0.4 percent, construction 0.4 percent, agriculture 0.3 percent, mining and quarrying 0.2 percent.

On the business tendency in the third quarter of 2009, the BPS chief said that it would not be as high as that in the second quarter.

"In general business conditions in the third quarter in 2009 are predicted to improve but the improvement pace will be slower than in the second quarter," Rusman Heriawan said.

Rusman said the business tendency index (ITB) in the second quarter in 2009 was recorded at 110.43 but it is expected it will be at only around 107.80 in the third quarter.

The ITB is an indicator of current economic development made based on data from the Business Tendency Survey (STB) carried out by the agency in cooperation with Bank Indonesia (the central bank).

The survey is carried out every quarter in several big cities across the country`s provinces. The survey in the second quarter involved 2,300 big and medium-sized companies and company executives.

The 110.43 index in the second quarter indicated an improving business condition from the first quarter which saw an index of 96.91.

In the second quarter all economic sectors had an increasing index. The index of the transportation and telecommunications sector was the highest at 115.65 while the processing industry recorded the lowest improvement with its index of 102.48.

Business conditions improved because business income, production capacity and average working hours rose. Service sector enjoyed the biggest business revenue while the manufacturing industry sector the lowest.

The agency predicts all economic sectors in the third quarter will see a rising index, except financial, leasing and corporate service sectors which are expected to drop.(*)