Indonesia sees slower growth in first quarter

Indonesia's year-on-year economic growth is likely to slow to between 4.5 and 4.7 percent in the first quarter of this year, but the growth is expected to pick up in the second quarter, an official was quoted as reporting by the Jakarta Post on Friday.

"The first quarter growth performance was not as expected, but it will improve in the second quarter," Coordinating Minister for the Economy Boediono said.

The central bank had previously said that growth in the first quarter was likely to have reached only 4.3 percent, the first slowdown in four years. Growth in the same quarter of last year was 6.9 percent. In the last quarter of 2005, Southeast Asia's largest economy expanded 4.90 percent on year.

Last year's two rounds of fuel price hikes, coupled with higher interest rates, have hit both consumers and firms hard.

The central bank earlier this week cut the Bank Indonesia rate for the first time since July by 25 basis points to 12.5 percent amid signs of easing inflation and a stronger rupiah.

Although a 25-basis point rate cut was far from sufficient to encourage the banks to cut their lending rates, analysts said that it was a positive signal that Bank Indonesia will continue to lower interest rates in the coming weeks if inflation falls further.

Declining interest rates, an expected increase in government spending and a projected 13 percent rise in exports will all help to boost economic growth in the second quarter, Boediono said.

The government expects the economy to grow by around 5.9 percent this year, compared to 5.6 percent last year.

Elsewhere, Boediono said that higher economic growth was crucial to alleviating the unemployment problem.

"The available number of jobs each year range between 1.3 million and 1.4 million, while the number of those seeking jobs is between 1.8 million to 1.9 million, or a deficit of about 500,000, " he said

"This requires serious attention. If the problems persist, people will lose faith in our experiment with democracy," Boediono said.

The government has targeted average economic growth of 6.6 percent per year for the five-year period ending in 2009.

Source: Xinhua