Jakarta – Indonesia's economy will grow by up to 3.8 percent this year and inflation will be fall to 9.5 percent under an optimistic scenario, Central Bureau of Statistics head Sudarti Surbakti said Wednesday.

Under a pessimistic scenario, she said, gross domestic product (GDP) might only expand by 3.2 percent this year and 3.5 percent next year – with inflation seen at 10.5 percent before falling to 9.8 percent in 2003.

The optimistic scenario was based on various assumptions, including improved political and social stability and an easing of the global economic slowdown, Surbakti told parliament.

"The US and Japanese economy and other main trading partners have started to recover," she said. Surbakti said that if the optimistic scenario materialised, GDP would grow 4.5 percent in 2003 with inflation falling to 8.5 percent.

Finance Minister Budiono was less sanguine last month, saying growth this year was likely to remain similar to last year's at around three percent. His comments contrasted with the government's earlier forecast of 4.0 percent.

Budiono said he was not optimistic about the hoped-for recovery in the US economy in the second half, which is expected to act as the locomotive for global economic growth. Inflation in February was up 15.13 percent from a year earlier.