W

e expect the Indonesian economy to grow moderately by 5.2 percent in 2010, following a dip in 2009 GDP growth to 4.3 percent.

While this is not a significant escalation, we believe an emerging middle class and a relatively young population will help drive a healthy and solid growth outlook for the country going forward.

This is underpinned by continued robust private consumption on relatively low inflation and increased consumer bank financing activities.

Similarly, investment activities may also rise in tandem with Indonesia's positive economic growth prospects.

However, this would hinge a great deal on how the scandals surrounding the Corruption Eradication Commission (KPK) would be resolved.

In our view, there continues to be a great need for Indonesia to attack corruption and for substantial increases in civil servants' salaries in order to reduce the temptations for graft.

In addition, problems related to the legal uncertainties afflicting commercial transactions must also be tackled.

This is particularly so given the fact that the KPK is currently in disarray, which could pave way for cronyism to weigh down upon reformers, blocking the momentum for institutional alteration that is currently taking shape.

For economic growth to take place, it is imperative for the government to ensure that poverty eradication remains on course for Indonesia. And this means the realization on the government's blue print on plans towards decentralization.

Apart from poverty eradication, it is clear that Indonesia's physical infrastructure requires improvement, but there are undoubtedly hurdles which must be overcome, such as on land acquisition.

Nevertheless, we remain positive on Indonesia's economic growth outlook in 2009 and 2010, particularly when compared to the rest of the world, still reeling from the recent global economic crisis.

As the government commits to boost infrastructure development and with private consumption remaining solid, we expect the country's economic growth to accelerate to 5.2 percent year-on-year next year.

But in the scheme of things, growth in moderation certainly places Indonesia ahead of the curve compared to most other countries in the world today.