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Indonesia's economy is estimated to have grown by 6.5 percent
during 2006's final quarter, the central bank said Wednesday.
This produced overall growth last year of 5.5 percent, thus providing a
good springboard for even higher growth this year at between 5.7 and
6.3 percent.
The growth in the last three months ending December 2006 was built on
the revival of spending following the easing of inflation and interest
rates, and the country's robust export performance, Bank Indonesia said
in its latest economic report.
An increase in investment also contributed to growth on the demand
side, albeit to a still-limited degree.
"With the (final quarter) growth, full-year growth for 2006 is expected
to reach 5.5 percent," BI said in the report, meaning that 2006 growth
was likely only slightly lower than the 5.6 percent growth recorded in
2005.
The official economic growth figure will be announced by the Central
Statistics Agency (BPS) next month.
Looking ahead, BI sees growth in 2007 continuing to gather pace on
higher spending -- both private and public -- with investment finally
kicking in to drive growth to between 5.7 and 6.3 percent -- with the
higher figure being the government's target.
"In the first half of 2007, growth will still be driven by consumption,
with investment yet to figure significantly," the report said.
"Growth is expected to accelerate in the second half, as private
investment and government spending increase."
BI Governor Burhanuddin Abdullah said Friday that Indonesia would need
up to Rp 808 trillion (US$89 billion) in total spending -- some Rp 150
trillion of it sourced from bank lending -- to help accelerate the
economy up to the government's growth target.
Growth in 2007 by demand-side sector would continue to be driven by the
transportation and communications sector (13.5 percent), and
construction (7.9 percent).
BI stressed that higher growth in 2007 would be unlikely to translate
into excessive inflationary pressures, and forecast that consumer
prices would rise by between only 5 and 7 percent over the course of
the year.
Inflation clocked in at 6.6 percent last year, slowing from 17 percent
at the beginning of 2006 following 2005's fuel price hikes, which
pushed up interest rates and stymied consumer spending and investment.
Like the heat from an engine, moderate inflation indicates that the
economic engine is running well, but too much of it reveals an
overheating economy and can derail growth, particularly in a
consumption-driven economy like Indonesia's.
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