Narendra Aggarwal - Indonesia's economy is expected to expand by about 3.5 per cent this year, driven by consumer demand, but it is too early to say if the same rate of growth will continue into next year, a top private sector economist has said.

Dr Syahrir, chairman of the Jakarta-based Institute for Economic Studies Research and Development, said yesterday that this was because gross domestic capital formation and foreign direct investment into Indonesia were yet to show signs of building up.

"Our's is a consumer-driven economy. The demand for goods and services is picking up. We can expect to grow by 3 per cent to 3.5 per cent this year. But for next year, I cannot say," he told The Straits Times on the sidelines of the Struggle for Indonesia conference.

There is some debate over Indonesia's likely growth rate this year. Central Bureau of Statistics chief Suwito Sugito recently lowered the official forecast to 1.5 per cent.

But President Abdurrahaman Wahid and top economics minister Kwik Kian Gie have said that they stand by the earlier estimate of between 3 per cent and 5.5 per cent.

Giving an example of the pent-up demand in some sectors, Dr Syahrir said that there was a six-month waiting period for the "Kijang" sports utility vehicle produced by car-maker Astra International.

The Harvard-educated economist added that despite the increase in consumer demand, there was little danger of the 5 per cent to 7 per cent "manageable rate of inflation" going up in the months ahead. "We now have a central bank that is more independent. Its ultimate job is to maintain price stability and we think it will successfully keep inflation in check," said Dr Syahrir.

However, there was confusion as far as economic policy was concerned as three different teams were responsible for monitoring the economy.