CORRECTION OF ECONOMIC GROWTH PROJECTION 2012

Bank Indonesia had officially cut projection of Indonesia’s economic growth from the previous 6.3% - 6.7% to economic growth from the previous 6.3% - 6.7% to 6.1% - 6.5%. Bank Indonesia argued that, adverse global economy was beginning to affect Indonesia’s performance in overseas trading to affect Indonesia’s performance in overseas trading so economic growth would be less than previously projected.

With reduced export, Indonesia’s economy which was projected to grow by 6.3% in quarter II 2012 was now projected to grow at around 6.1% - 6.5% in 2012. BI was resolved to keep watch on global economic trend which was showing downturn and clouded by deep uncertainty.

Solution of crisis in Europe might still take a long time to accomplish in spite of some notable progress at the European Union summit sometime ago. Worsened global economy had its impact on correction of economic growth projection of some Asian states like China and India who were Indonesia’s trading partners.

Meanwhile global commodity prices, including import price, continued to decline in line with declining world’s demand. Nevertheless Indonesia’s economy was still predictably strong thanks to domestic demand, including domestic demand and high growing investment.

All sectors were predicted to grow satisfactorily. The sectors which were expected to be the main propeller of economic growth were among others transportation and communication, trading, hotel and restaurants and industry.

Revision of economic growth projection by BI was rated as reasonable and even slightly ambitious, because the ceiling of growth estimate ambitious, because the ceiling of growth estimate at 6.5% BI was felt as not reasonable considering that some other countries were cutting their economic growth projection in grater magnitude.

Even China whose growth rate last year was still 9.5% only sets target at 7.5%, while the growth performance in first quarter of 2012 was 8.1%. India was even worse: in quarter I growing only by 5.1% while inflation was 10.4%. SO if the Government of RI sets growth higher than last year (6.5%) it seemed totally not reasonable.

Many analysts and economists estimated Indonesia’s economy this year would grow less, i.e. in the range of 6.0% - 6.3% as moderate level. The point was, it was good enough to grow at least by 6% alone.

Correction of Indonesia’s growth projection by BI was in line with latest revised overview by the International Monetary Fund (IMF) on the world’s economic projection. IMF lowered projection of global economic growth from 3.9% in 2011 to 3.5% in 2012.

Projection of economic growth of developed nations were eroded from 1.6% in 2011 to 1.4% in 2012. Economic projection of European states dropped from 1.4% in 2011 to minus 0.3% in 2012. Asian countries as emerging states also had correction on their economic growth projection from 6.2% in 2011 to become 5.7% in 2012.

However IMF predicted economic growth of the world, Europe and Asia would revitalize by 2013 in line with reformation effort on Europe’s debt crisis through various therapeutic measures.

The bail out program for Greece and Spain were expected to speed economic recovery in Europe, moreover in addition to the austerity plan run by bail-out receiving countries.

Simultaneously the process of economic restoration in America to rescue the country from fiscal trap was showing result, moreover the measures would generate positive sentiment to the Asian region.

Economic restoration in Europe, America and Asia would jack up world’s trade volume to above 4% in 2013 after having growth correction at 3,8% in 2012. Transaction of international, multilateral and bilateral trading would be revitalized. Trade finance activities would be revitalized as well. Production capacity would be restored to normal so unemployment could be minimized and poverty figure would be downsized.

 Business News - July 20, 2012