Urip Hudiono, Jakarta – Rising investment and an in-check inflation rate are seen pushing Indonesia's economy toward the 6.3 percent growth targeted by the government for the year.
The Investment Coordinating Board (BKPM) reported last week that actual foreign direct investment (FDI) had by the end of September nearly doubled to US$8.54 billion – mostly in the transportation and communications sectors – from $4.29 billion in the same period last year.
The BKPM noted a more than threefold rise in FDI approvals to $33.03 billion during this period, mostly in the chemical industries, while domestic investment approvals increased 58 percent to Rp 171.46 trillion.
The Finance Ministry highlighted stronger investment and higher consumption in its latest assessment of the economy last week, seeing both as providing the stimulus for faster growth of between 6.2 and 6.4 percent year-on-year for the three months to September – slightly higher than the 6.3 percent growth registered in the second quarter.
The government expects Indonesia's economy to grow by an overall 6.3 percent for 2007, and faster still at 6.8 percent next year. The economy grew by 5.5 percent last year, slightly lower than 2005's 5.6 percent.
For 2007's third quarter, investment is expected to grow by between 7.17 and 7.27 percent, the Finance Ministry's Fiscal Policy Agency said, up from 6.86 percent the previous quarter.
Private consumption is also expected to grow by between 4.79 and 4.86 percent from 4.66 percent the previous quarter, and government consumption between 3.58 and 3.87 percent from 3.83 percent.
Rising inflation during Ramadhan and Idul Fitri had led to concerns of consumption being affected, as the central bank had to hold its benchmark interest rate – which affects borrowing costs in the country – to help address the situation.
However, Finance Ministry Sri Mulyani Indrawati said over the weekend that inflation might ease after the holiday between 5 and 7 percent on-year, balancing out the adverse effects on consumption.
"Inflationary pressures were indeed high in August and September, due to the holidays and seasonal factors, and it will be a 50-50 situation for October," she said. "We also have to still watch out for rising inflation at the end of the year."