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The skyrocketing Jakarta stock index is likely to test and
pass the 2,000 mark early next year on rising confidence in the
nation's overall economy, says Bank Internasional Indonesia (BII).
BII chief economist Ferry Latuhihin said that market confidence in
Indonesia's economy was on the rise amid falling interest rates and
inflation. Interest rates were predicted to hit single digits in the
first quarter of next year, as opposed to 10.25 percent at present, and
continue to ease over the mid term thereafter.
Ferry said the improvements in the two indicators would boost consumer
spending, which would in turn keep the economy humming. With investment
levels still disappointing, the Indonesian economy relies heavily on
both household and government spending.
"Indonesia's long-term outlook is quite promising. We forecast that by
the end of the year, gross domestic product (GDP) will have increased
5.5 percent," he said Monday during a seminar on economic and business
outlook for 2007.
BII forecasts that GDP growth will increase to 6.19 percent in 2007,
6.25 percent in 2008 and 6.33 percent in 2009. Growth could even be
higher next year, said Ferry, if the government managed to get the
projects offered during the last infrastructure conference up and
running.
"If these projects are commenced, I am bullish that GDP growth will
touch 7 percent next year," he said.
And portfolio investors, such as those in the stock market, would be
encouraged by the improving economic situation to invest more in the
stock market, emulating this year's trend where the market index has
been bolstered by the strengthening economy.
In addition to the improvement in the overall economy, Ferry said the
fact that the prices of many shares traded on the Jakarta bourse were
still cheap, if compared to similar stocks around the region, would
encourage more buying, which in turn would push the index up further.
The Jakarta stock market's composite index closed Monday at 1,684.00.
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