IMF praises Indonesian economy 2009-07-29 13:58:13   Print

    JAKARTA, July 29 (Xinhua) -- The International Monetary Funds (IMF) has hailed the resilience of the Indonesian economy due to strong initial fundamentals and appropriate policy responses, the group said in a statement at its website on Wednesday.

    The praise comes as the Southeast Asia largest economy has skirted the worst of the global recession with positive growth of 4.4 percent at the first quarter along with China and India, while others Asian neighbors befell it with negative growth.

    The Indonesian government is struggling to achieve equitable growth to cushion the impact of the suicide bombings in two super tight-security luxury-hotels on July 17, that killed 9 people and wounded more than 50 others.

    "Executive Directors welcomed the resilience of the Indonesian economy, which owed much to strong initial fundamentals and appropriate policy responses. Private consumption, supported by the fiscal stimulus package, has kept growth positive and among the highest in the region," the IMF said.

    The group said that the country's financial sector had recovered from the adverse initial impact of the global turmoil, and investor sentiment had improved in recent months.

    Yet, the IMF warned that another round of global risk aversion could adversely affect external liquidity, demand, and growth prospects for Indonesia.

    "It will therefore be important that the authorities strive to achieve the appropriate policy mix, and promptly adjust it as needed, to preserve macroeconomic and financial stability," it said.

    As the government has launched 73.3 trillion rupiah (some 7.6 billion U.S. dollars) stimulus package partly to finance a huge infrastructure projects as an effort to cushion the fallout of the global financial routs in 2009, the group gave their praise on it.

    The group suggested to maintain some of the stimulus in 2010, given the available fiscal space.

    IMF also commended the authorities for the progress in fiscal reforms toward a consolidated Treasury Single Account, simplified budget execution procedures, and strengthened cash management.

    IMF praised the monetary policy easing since December 2008, saying it was timely and appropriate in the face of decelerating inflation and weakening investment. The Indonesian The Indonesian central bank in July cut its benchmark interest rate for an eighth straight month, putting the cumulative easing to 275 basis points since December,

    The group encouraged the authorities to continue to strengthen the monetary policy framework. "Strong commitment to the medium-term inflation targets, as well as publication of inflation forecasts, would help guide inflation expectations and enhance policy credibility."

    The group forecast Indonesia's economic growth accelerated at the slower pace to 3.5 percent this year and 4.5 percent in 2010 after reaching 6.1 percent in 2008. The prediction is lower that the government target of around 4.5 percent this year and 5.5 percent next year.

    Economic growth is expected to help reduce rising unemployment, which is stand at 8.1 percent this year, in the country which some32 million people live in less than 70 cents, according to the government data.

    On exports, the IMF predicted it would growth minus 0.9 percent this year and 0.5 percent next year.

Special Report:  Global Financial Crisis

Editor: Xiong Tong
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