[Kabar-indonesia] Bank Indonesia Says 3Q GDP Likely Grew 5.4% On Year

[JoyoNews at aol.com]

Bank Indonesia Says 3Q GDP Likely Grew 5.4% On Year

JAKARTA, October 5 (Dow Jones)--Central bank estimates issued 
Thursday indicate that Indonesia's full-year economic growth for 2006 
will likely be slightly above 5.5%.

That projection is below the official government forecast of 5.8%
economic expansion in 2006 and suggests that President Susilo 
Bambang Yudhoyono's target of 6.6% annual growth for 2005-2009 
is overly optimistic.

Bank Indonesia Governor Burhanuddin Abdullah told reporters at a 
media briefing that Indonesia's economy likely grew 5.4% on year 
in the third quarter of 2006.

That projection would outpace both the 5.22% expansion in the second
quarter and the 5.34% gross domestic product growth in the third
quarter of 2005. [ 05-10-06 0703GMT ]

Bank Indonesia Deputy Governor Hartadi Sarwano said the official 5.8%
gross domestic product forecast, which has already been revised
downward this year from an earlier 6.2% projection, is achievable if
the government "works hard to remove some of the obstacles." Sarwano
didn't explain what those obstacles are.

The central bank projection for 2006 GDP growth will be sobering news
for a government struggling to boost the economy as a means to
decrease the potential threat of social instability from growing
joblessness.

Indonesia is "losing ground" in creating adequate job opportunities,
as the 1.2 million-1.4 million new jobs created annually are
outstripped by the 1.6 million-1.8 million people entering the job
market, Coordinating Minister for the Economy, Boediono, said in
March.

Abdullah reiterated that future cuts in the benchmark Bank Indonesia
one-month rate would hinge on easing inflation.

Bank Indonesia's Board of Governors cut the benchmark Bank Indonesia
one-month rate by 50 basis points to 10.75% Thursday after September
on-year inflation eased to 14.55% from 14.90% in August.

Analysts and Bank Indonesia officials expect the benchmark rate to
decline to around 10.00% by the end of 2006 in line with an official
forecasted fall in on-year inflation to 7.00%-8.00% in the same
period.

Sarwono said on-year inflation would ease to around 6.7% by end-2006
and fall further to around 6.0% by the end of 2007.

Bank Indonesia will repay the government's outstanding $3.2 billion
debt to the International Monetary Fund next week, Abdullah said.

That repayment would be the second and final repayment installment,
after the government made an advance repayment of about $3.7 billion
in June on debt owed to the IMF, which will mature in 2010.

That repayment is possible thanks to a rise in Indonesia's foreign
exchange reserves resulting from the high prices of export commodities
including gas, oil and crude palm oil.

Abdullah said Indonesia's foreign exchange reserves would likely hit
$43.3 billion at the end of the year, compared with $42.36 billion at
the end of September. The country's balance of payments surplus for
2006 would likely be around $13.2 billion, he said.

Bank Indonesia on Thursday issued a raft of regulations aimed at
boosting domestic bank lending and bolstering prudent commercial
banking practices, Abdullah said.

One regulation relaxes the definition of parties that are related to
the banks. Related parties include borrowers with business or family
ties to the lender, loans to which are limited to 10%-20% of the
bank's equity capital, depending on the situation.

"With this relaxing of the regulation, it's about time for banks to
optimize their role in channeling funds to the real sector," Abdullah
said.

The central bank will also push ahead with bank sector consolidation
efforts, he said.

Bank Indonesia's main consolidation tool is its Single Presence
Policy, unveiled in July. The SPP bars investors from owning
controlling stakes in more than one bank and encourages bank mergers
to comply with the rule.

However, Abdullah reiterated that the regulation won't affect the
Indonesian operations of foreign banks, and joint venture banks formed
by local investors with foreign partners.

Currently, there are 11 foreign banks with branches in Indonesia, such
as Singapore's United Overseas Bank Ltd. (U11.SG), Overseas Chinese
Banking Corp. Ltd. (O04.SG) and Standard Chartered PLC (STAN.LN).

Bank Indonesia set 2010 as the deadline to comply with the Single
Presence Policy, but it doesn't rule out an extension of the deadline
if bank owners encountered "complex" problems in their efforts to
comply with the rule, Abdullah said.

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Joyo Indonesia News Service
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