Aditya Suharmoko, Jakarta – The government remains upbeat the economy will grow 6.4 percent this year on the back of strong domestic consumption, despite a high inflation rate caused by a surge in key global commodity prices.
Anggito Abimanyu, head of fiscal policy at the Finance Ministry, told a press briefing Wednesday the economy was growing as forecast this year, as demonstrated by an encouraging first quarter performance.
"In the first three months of 2008, the country's economy is estimated to have grown by between 6.2 and 6.3 percent, driven by private consumption," Anggito said.
The official economic growth figure will be revealed by the Central Statistics Agency later in the month.
Anggito said consumption contributed about 60 percent of the national economy, with investment and exports each accounting for about 20 percent.
The rate of private consumption in the first quarter is estimated to be 5.15 percent higher than in the same period last year, a rise attributed mainly to increases in consumer credit, car and motorcycle sales and electricity consumption, he said.
Car sales between January and March this year are estimated to have grown by 60.5 percent on the same period last year. Motorcycle sales have grown 28.6 percent. The national economy grew by 5.98 percent in the first three months of 2007.
"We are optimistic the country's GDP growth can reach 6.4 percent, but we need to control the high inflation rate, which can eventually dampen consumption," Anggito said.
The inflation rate reached 3.41 percent in first quarter, more than half the government's full-year inflation target of 6.5 percent, due to rising global prices of commodities such as soybeans, flour, corn and rice.
The high price of key commodities increases the burden on poor households, which spend most of their income on food. To lower the price of key commodities, the government has implemented measures such as removing the import duty on soybeans and subsidizing rice for poor people.
Anggito said investment growth in the first quarter was estimated at around 9.5 percent, compared with 7 percent recorded in the same period last year. "Investment and working capital loans are showing signs of increasing, meaning the banking sector is supporting them," he said.
Exports are estimated to have dropped from 8.12 percent in the first quarter of 2007 to 7.6 percent between January and March this year.
Economist Cyrillus Harinowo also said he was optimistic about the national economy because domestic consumption remained robust. "I believe the economy can grow by more than 6.2 percent this year, due to the growing consumption rate," he said. He said some consumer goods and food companies had exceeded their first quarter targets.