Indonesia's economy is set for moderate growth this year as the country struggles to recuperate from last year's slowdown amid lingering high oil prices, a weak investment climate and possible electricity and wage hikes.

The World Bank's country director for Indonesia, Andrew Steer, was quoted Wednesday by The Jakarta Post daily as saying that Indonesia could expect GDP growth of between 5 and 5.5 percent this year, with consumption and investment continuing the slowdown that started last year.

This is lower than the 5.5 to 6 percent growth forecast by the World Bank in its October 2005 economic update for Indonesia, as well as the government's official 6.2 percent target for this year as stated in the budget.

"The year 2006 is not going to be the year we had hoped it to be last year," Steer said, adding, "Although Indonesia's consumption-driven economy has recently shifted to a more sustainable, investment-oriented one, investment has suffered from the recent high interest rate environment."

Indonesia's economy slowed down from 6.2 percent growth during last year's first quarter to 5.3 percent in the third quarter as high oil prices hit the rupiah and the ensuing fuel price hikes spurred inflation, forcing the central bank to raise its key interest rate to its current level of 12.75 percent.

Steer, however, was upbeat that an economic rebound was on the cards later in the year, saying that "a healthy 5 percent economic growth is better than an unhealthy 6 percent one."

Source: Xinhua