Urip Hudiono, Jakarta – With encouraging increases in consumption, exports and investment during the first three months of this year, the Indonesian economy is well on track for higher growth, Finance Minister Sri Mulyani says.

Speaking to reporters following a meeting with Coordinating Minister for the Economy Boediono and Bank Indonesia Governor Burhanuddin Abdullah, the finance minister said that she was upbeat the economy would turn out to have grown by between 5.7 and 5.9 percent during the first three months.

This would be higher than both 2006's 5.0 percent first-quarter growth, and 5.5 percent full-year growth. "Things are generally improving in all areas of the economy that contribute to growth," Mulyani said.

She said that personal consumption probably increased by 10 percent, investment by more than 10 percent and exports by more than 19 percent during the first quarter. "We are still keeping a close eye on possible volatility in the price of rice, but we expect inflation in April and May to continue easing," Mulyani said.

Monthly inflation slowed to only 0.24 percent in March from 1.04 percent in January. On a year-to-year basis, however, consumer prices picked up slightly to 6.52 percent in March from 6.26 percent in January.

Lower inflation has provided room for the central bank to lower its key interest rate from double-digit levels last year to 9 percent at the present time. Earlier this month, however, the central bank skipped an expected further rate cut on the back of mixed inflation data.

Inflation and interest rates have a major effect on growth as Indonesia's economy is still mostly consumption-based.

The Central Statistics Agency (BPS) is scheduled to announce the official figures for first-quarter growth in mid May.

At the start of this month, BI estimated that growth during the first-quarter would amount to only 5.4 percent, but would pick up later over the course of the year. Based on preliminary data up to the third week of March, BPS director Rusman Heriawan has predicted that first-quarter growth will be higher than 5.4 percent, but likely no more than 5.9 percent.

Indonesia needs higher growth to help provide jobs for the country's vast army of unemployed, and improve overall welfare levels, particularly for the poor. The government is targeting a growth rate of 6.3 percent for this year, and 6.8 percent for 2008, while the central bank puts growth at between 5.7 and 6.3 percent for this year, and between 5.7 and 6.7 percent next year.