'Global crisis may slow growth next year'

06 Oct, 2008

Indonesia's economic growth is likely to slow next year because of the global financial crisis although the government expects to meet several economic targets for this year, the finance minister said on Sunday.
Southeast Asia's biggest economy grew 6.3 percent, the fastest pace in more than a decade, last year pushed by strong exports of commodities including palm oil, rubber, gas and a steady drop in interest rates.
Analysts, however, expect global demand for the country's commodities and mining products, which account for a major share of its exports, to weaken amid the credit crisis in some major economies. "Several macroeconomic targets are likely to be met this year, yet the government must remain vigilant," Sri Mulyani Indrawati told reporters.
"The US credit crisis will be felt in the next two to three quarters ... thus 2009 and 2010 will be a critical period," she said. "The downside risk of growth is widening" next year, she said. "The 2009 state budget should reflect a realistic situation to prevent speculation."
Economists forecast Indonesia's economy will slow to 6.2 percent in 2009, according to Reuters poll in September. Indonesia's state budget has pegged growth at 6.4 percent in 2008 and 6.3 percent next year. Indrawati also said the government plans to revise the 2009 budget deficit to 1.5 percent of GDP from a forecast 1.7 percent. The assumptions are subject to full parliamentary approval. Parliament expects to complete deliberations on the 2009 budget in October.

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