BI revises down economic growth estimate

The Jakarta Post, Jakarta | Fri, 03/27/2009 9:43 PM

The central bank has revised its estimate for the country’s economic expansion to between three to four percent or slower than the four to five percent growth expected earlier.

"Yes it's been revised. BI now uses the 3-4 percent forecast," said Bank Indonesia senior deputy governor Miranda S. Goeltom in Jakarta on Friday as quoted by Antara newswire.

Miranda said the economic growth strongly relied on the success of the stimulus plan. If the stimulus plan was successful economy would grow four percent but if it failed the economy would only grow around three percent, she said.

She said the economic downturn was not only caused by a drop in exports but also a decline in investment.

"Shortage of liquidity in the world has caused investment to decline and therefore we hope with the fiscal stimulus growth will be maintained positive," she said.

She said Indonesia was now the only country that still recorded positive growth. "If you would observe our country was the only one in the Asean region which remained blue," she said.

Regarding the impact of an export decline on the country's foreign exchange reserves and currency exchange rate, Miranda said it would not be very significant.

"Our country is not the one that requires exporters to put funds in the central bank and so the drop in exports would not directly affect Indonesia's foreign exchange reserves. It is different from Thailand and even China where exports are directly linked with foreign exchange reserves," she said.

She said it was the shortage of US dollar supply that would significantly affect the country's foreign exchange reserves.

Therefore, she said, various breakthroughs needed to be taken to reduce pressures on dollar demand in the midst of current tight liquidity.

She said one of the efforts that had been taken to ease pressure on the dollar demand so far was conducting a bilateral currency swap arrangement with China reaching up to Rp175 trillion or an equivalent of 100 billion reminbis.

About inflation Miranda said that it would tend to drop.

"What is clear is that inflation will drop," she said.