Growth Forecasts

Sep 5th, 2006, in Business & Economy, by

Various bold predictions from the leader of the nation, president Susilo Bambang Yudhoyono.

On the 4th the president, known usually as SBY, predicted that the Indonesian economy would double in size in the next ten years.

I am convinced that with the right policies and lots of hard work, and perhaps a little luck, Indonesia’s GDP will double in the next 10 years.

He told the “Forbes Global CEO Conference” in Singapore.

Inflation, he said, would be reined in to single digit levels and foreign investment would be wooed with reforms making Indonesia “an easy, attractive and profitable place for business to grow”. By 2010 the tax rate will have been reduced from 30 to 25%, he said, and corruption would be better handled.

Some of the assembled businessmen at the conference in Singapore were curious as to Indonesia’s plans and abilities in competing with the giants of China and India. Yudhoyono asserted that after 2010 Indonesia would be ready to go head to head with those countries, whose economies he suggested sufferered from over-heating.

On the prospects for Indonesian growth, in the short term at any rate, however, Fauzi Ichsan of Standard Chartered Bank suggested that the government’s forecast of 6.3% growth for 2007 was too optimistic, saying instead that a range of 5.8-6.0% was more realistic.

He pointed out that although second quarter GDP for 2006 evinced better than expected annualized growth of 5.2% it was largely driven by government spending, while domestic consumption was still weak due to last year’s sharp rise in fuel prices.

The current government forecast for total 2006 GDP growth was recently revised down from 6.2 to 5.9%. In making this prediction the following assumptions are made:

  • 2007 inflation rate of 6.5% as against 8% this year.
  • Rupiah range of 9,300 – 9,000 against the dollar.
  • Interest rates for 3-month Bank Indonesia Certificates (SBI) averaging at 8.5% as against 12.0% now.
  • Oil at $65 in 2007.

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