Indonesian economy seen stable

Indonesia's economic outlook for next year is stable, but the poor of Southeast Asia's biggest economy look set to gain few of the benefits, experts said Monday. Strong domestic consumption and overseas demand for commodities were likely to push economic growth to between 6.2 and 6.8 percent in 2008, said Made Sukada, director of the central bank's economic research unit.
The Indonesian government is targeting growth of 6.3 percent this year and forecasts that the economy will expand by 6.4 to 6.7 percent in 2008. "We believe the high growth is quite feasible on an inflation rate of five percent, plus or minus one percent. I think it's ... a sensible target," Sukada told a panel discussion with journalists.
Indonesia has experienced a steady improvement in growth after overcoming high interest rates and a sharp rise in the price of fuel caused by a drastic cut in subsidies in late 2005. Recent political stability and strong performance by the local stock market had also created a more conducive environment for foreign investors, Sukada said.
M. Ikhsan, an adviser to Indonesian economy minister Budiono, warned that while the outlook was good, little progress had been made in tackling persistent poverty and unemployment in the sprawling nation. "I think 2009 and forward it will be easy for us to reach back to the pre-crisis level growth rate," Ikhsan said, referring to Indonesia's boom years before the 1997 Asian financial crisis. But, he warned, the economy must grow at a faster pace than pre-crisis in order to absorb enough of the swelling workforce.
He said he was concerned about inflation, mainly because of food price hikes, particularly for rice, which would hurt the poor. Also speaking at the panel, Standard Chartered Indonesia senior economist Fauzi Ichsan cautioned that Indonesia's improving position could be vulnerable to economic uncertainty from the United States. "If the US economy tanks, then the global economic growth will tank, unless of course Asian economic growth remains robust," he said.