Indonesian government and central bank claim IMF growth forecast of 5.3% too low
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Bank Indonesia (BI) and the government are confident that this year's economic growth will be higher than the International Monetary Fund's (IMF) projection, thanks to improvements in the third quarter of 2013.
Finance Minister M Chatib Basri said the IMF’s projection was too low given the current consensus of 5.5 per cent to 5.9 per cent growth of gross domestic product (GDP).
He also said the IMF’s projection was not consistent with the current-account deficit, which stands at 3.4 per cent of GDP in 2013.
“Our current account deficit is driven by high imports, which are mostly raw materials and capital goods. If imports remain high, investments will remain high. Economic growth cannot be that low if investments are still high,” Chatib said on Tuesday.
The minister added that next year’s economy would improve on the back of better economic conditions in the United States and Japan.
He was commenting on the October 7 World Economic Outlook, in which the IMF slashed its Indonesia growth projection to 5.3 per cent, from April’s 6.3 per cent.
The organisation said that Indonesia’s economy would improve in 2014, with GDP growth estimated at 5.5 per cent – also lower than the IMF’s April projection of 6.4 per cent.
“Growth in Indonesia will slow due to sluggish investment and weaker commodity demand from other emerging market economies, as well as tighter financing conditions,” said the IMF report.
The IMF’s projection is lower than that of the World Bank (WB), which says that GDP will expand 5.6 per cent this year. The IMF also expects the global economy to expand 2.9 per cent this year. It attributed the lower projection to uncertainty over US economic policies, as well as China’s slowing economy.
BI Governor Agus Martowardojo said he expected the country to meet a growth target of 5.5 to 5.9 per cent in 2013. Agus argued that government spending would also help achieve the target.
Data from the Finance Ministry directorate general of treasury showed that as of September, the spending figure had amounted to 1.09 quadrillion rupiah (Bt2.98 trillion), equal to 63.3 per cent of the 2013 spending allocation, which was set at 1.73 quadrillion rupiah.
