T

he Asian Development Bank (ADB) issued a brighter outlook on the Indonesia economy Tuesday, with a senior executive predicting that the country’s gross domestic product would grow more than 6 percent this year.

ADB senior country economist Edimon Ginting said in Jakarta on Tuesday that he believed with the strong economic growth of 5.9 percent recorded in the first half, this year’s GDP growth may accelerate to between 6.2 and 6.3 percent, exceeding the government’s target of 5.6 percent.

“We registered 5.9 percent economic growth in the first half, which was very respectable compared to our neighbors. With such an achievement, I think our GDP growth can reach between 6.2 and 6.3 percent this year,” Ginting said after the launch of a report titled “Indonesia: Critical Development Constraints”.

The report, compiled by the ADB, the International Labour Organization (ILO) and the Islamic Development Bank (IDB), outlines key obstacles and solutions to achieving higher, socially inclusive and environmentally sustainable growth in the medium term.

“In the next few years, economic growth of 7 percent or 8 percent will no longer be a dream as long as we accelerate reforms in various sectors,” he said, emphasizing that the improvement of infrastructure such as roads, ports and power plants would be a key factor to spurring overall economic activities.

The International Monetary Fund (IMF) also forecast Indonesia’s GDP would grow at 6 percent
this year on the back of strong domestic consumption and a surge in investment.

A report issued by the Central Statistics Agency (BPS), said Indonesia’s economy grew 5.9 percent in the first half thanks to increased investment, government spending and consumer spending.

Indonesia’s economy grew 4.5 percent in 2009, one of the few countries in Asia that recorded economic growth during a period of global recession. The better-than-expected first-half economic growth has attracted an inflow of foreign funds that have become major contributors to the sharp strengthening of the country’s stock exchange and rupiah.

The stock exchange’s main composite index has increased 19.69 percent since early January, making it one of the best performers in Asia. The rupiah has appreciated 4.8 percent in the same period.

Meanwhile, the deputy minister of the National Development Planning (Bappenas), Lukita Dinarsyah Tuwo, acknowledged that the country’s lack of adequate infrastructure hampered economic development in many parts of the country.

For this reason, infrastructure development had become a priority for the government, he said, adding that a number of programs, including a private partnership program, had been introduced to attract private sector involvement in infrastructure development projects.

ADB principal economist Muhammad Ehsan Khan said the Indonesian economy performed
well in recent years and recorded the highest growth rate in Southeast Asia in 2009.

“Recent development performance has been good, but challenges remain,” he said. Recent growth, for example, did not reach the average rate achieved between 1967 and 1997, and private investment had not fully recovered. (ebf)