Indonesia said Thursday its economy posted robust growth in the first quarter thanks to rising investment, exports and strong domestic consumption.
Southeast Asia's largest economy expanded 6.50 percent in the January – March period from a year earlier, and 1.50 percent from the previous quarter, the official Statistics Agency said. This follows growth of 6.90 percent in the October – December period, when the economy usually receives a temporary boost from budget disbursements.
"Looking ahead, we expect growth momentum to accelerate to an average pace of 6.40 to 6.80 percent by 2013," Finance Minister Agus Martowardojo said.
Speaking at a forum of finance ministers organized by the Asian Development Bank, Martowardojo said Indonesia's economy had gained momentum from domestic demand and favorable global conditions.
The government expects the resource-rich archipelago of 240 million people to grow 6.40 percent this year after expanding 6.10 percent in 2010, when it was among the best performing economies in the Group of 20 nations. Analysts said the government would have to boost spending to achieve its annual growth target as exports could be hit by falling Japanese demand in the aftermath of the March 11 earthquake and tsunami disaster.
Bank International Indonesia economist Juniman also warned that rising inflation could hurt household consumption. "The only things the government can push is investment and its own spending," he told Dow Jones Newswires.
Inflation eased to 6.16 percent in April from a year earlier, thanks to lower basic food prices during the harvest season, according to official figures released on Monday. Bank Indonesia in April held interest rates at 6.75 percent after prices eased slightly a month earlier, but the central bank warned the risk of inflationary pressures remained high.
The International Monetary Fund has urged Indonesia to slash expensive fuel subsidies and redirect the money into building badly needed infrastructure to spur long-term growth.
[AFP/Dow Jones Newswires contributed to this story.]