Natural disasters hamper Indonesia s economic growth

Successive natural disasters that hit Indonesia this year have hampered the country's economic growth, said Bank Indonesia (BI) Governor Burhanuddin Abdullah.

"The country's economic growth has been hampered and it is not likely to achieve the target that has been set due to various natural disasters in various regions," Antara news agency quoted Abdulah as saying in Bali on Friday night.

He said economic growth which was set at 5.2 percent this year up to the seventh month only reached 2.4 percent.

"Economic growth was hampered by disasters such as earthquakes, floods, drought and tsunami that struck Indonesia of late," the Indonesian central bank governor told a regional bank representatives forum.

But a banker said earlier this month that Indonesia's macro economy in the second half of 2006 would grow more rapidly than that in the first half although such factors as the discontinued cut in the key interest rate (BI Rate) may slow down its growth.

Bank Indonesia was supposed to lower the BI Rate in March or April but the rate had remained at 12.50 percent up till now, he said.

The central bank kept the key rate unchanged at 12.75 percent for four months in a row since December last year due to lingering inflationary pressure and surging oil prices.

The decision to maintain the BI Rate at 12.50 percent was the main obstacle to the channeling of bank credits as debtors put credit applications to the bank on hold, he said.

By Xinhua