Urip Hudiono, Jakarta – The government is upbeat that Indonesia's economy will continue to pick up momentum this year, with growth of between 6 and 6.11 percent year-on-year anticipated in the second quarter, on higher investment, exports and domestic spending.

Indonesia's economy, which recorded year-on-year growth of 6 percent in the first quarter of this year, will have expanded by 6.04 percent in the year's first half, the head of the Finance Ministry's Fiscal Policy Agency, Anggito Abimanyu, predicted Thursday.

The government further estimates that year-on-year growth will clock in at 6.29 percent and 6.45 percent in the third and fourth quarters, respectively, so as to achieve the 6.3 percent full-year growth rate targeted for 2007. "Realized investments will increase, building on the back of increasing investment approvals since 2005," Anggito said while commenting on the ministry's latest economic assessment.

Rising cement consumption and imports of capital goods have also left the government upbeat that investment will turn out to have grown by 11 percent in the second quarter.

The Investment Coordinating Board reported a 52 percent increase to Rp 65.2 trillion (US$7.2 billion) in the total realization of both foreign and domestic investments during the first semester compared with the same period of last year, mostly in the chemical, pharmaceutical and paper industries. It takes some two years before investment approvals are fully realized.

Consumer spending, meanwhile, is believed to have grown by 4.9 percent, and government spending by 8.9 percent, Anggito said, while exports are projected to have increased by 9.4 percent in the three months from April through June.

On the supply-side of the economy, ongoing growth in the communications, transportation, manufacturing and agricultural sectors are expected to more than compensate for the slight slow-downs in the construction, utilities, mining, trade and tourism sectors.

With inflation having eased to 5.77 percent on-year and cumulatively to only 2.08 percent in the first half, total spending is expected to have risen, as indicated by increasing auto sales, consumer credit and value-added tax revenues.

With the ongoing efforts to stabilize consumer prices – particularly the recent volatility in the prices of rice, cooking oil and sugar – the government sees inflation falling to between 5.5 and 6 percent by the year's end.

"Inflation should come in at around that figure if we double the 2.1 percent cumulative inflation up the end of June, and add on some 0.6 percent to take account of the usual impact of the holidays at the end of the year," Anggito said.

The Central Statistics Agency will announce the official second quarter growth figures next month. Growth during 2006's first half slowed to some 5 percent from 2005's 6 percent due to the fuel price increases in 2006.

Some analysts and commentators have urged the government to aim for better quality growth that would benefit the poor and unemployed through more jobs and increased earning opportunities, and have criticized the trend to technology-intensive rather than labor-intensive investment.