RI economy may expand 3.9 percent this year: Citi

Aditya Suharmoko ,  The Jakarta Post ,  Jakarta   |  Mon, 05/18/2009 6:32 PM  |  Business

Indonesia's economy may expand as high as 3.9 percent due to a more domestic-oriented economy, which is the key to Indonesia's resilience amid the global economic downturn, Citi said Monday.

"We revise up our real GDP growth forecast for 2009 to 3.9 percent, from 3.5 percent. Although the first quarter headline figure was not that different to our forecast, we think our earlier growth forecast trajectory, particularly on consumption, may have been too pessimistic," Citi chief economist Johanna Chua said in a statement.

She added that the 4.6 percent forecast for full-year growth of 2010 would be maintained. Indonesia's economy grew by 4.4 percent in the first quarter this year, beating consensus forecast of 4.3 percent.

"We think a key source of Indonesia's growth outperformance was the surprisingly buoyant private consumption, which grew 5.8 percent year-on-year. We think the impact of the cumulative 225 basis points rate cuts, sharp disinflation and election-related spending has helped cushion private consumption, even though we are seeing no real signs of fiscal accommodation," said Chua.

She also said Bank Indonesia would likely continue to cut rates by 25 basis points in the next two meetings to 6.75 percent, as inflation to decelerate to 5 percent by June.

Citi, the leading global financial services company, has approximately 200 million customer accounts and does business in more than 140 countries through its two operating units, Citicorp and Citi Holdings.

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