SBY eyes 6.6% average annual growth rate

The Jakarta Post, Jakarta | Tue, 01/05/2010 8:25 AM

Stronger bourse: President Susilo Bambang Yudhoyono (center) officially opens the 2010 first-day trading at the Indonesia Stock Exchange in Jakarta on Monday. The composite index strengthened 41.06 points, or 1.6 percent, to 2,575.41 during the day’s trading. JP/Ricky Yudhistira

Indonesia’s economy may grow by an average annual rate of 6.6 percent over the next five years and reach 7 percent by the end of 2014, President Susilo Bambang Yudhoyono said at the opening of the first trading day in 2010 of the Indonesia Stock Exchange.

In his second five-year term Yudhoyono plans by 2014 to have the unemployment rate fall to between 5 and 6 percent from 8 percent currently, and to reduce the poverty rate to between 8 and 10 percent from 14.2 percent.

Yudhoyono said the Indonesian economy showed all the favorable conditions required to attain 7 percent growth by 2014 as long as there was economic and political stability.

A key contributing factor to economic stability, he said, was to have strong foreign currency reserves.

“We now have only US$65 billion [in foreign currency reserves]. This must be increased in line with our volume of trading,” Yudhoyono said, announcing a target of US$100 billion for currency reserves by 2014.

Yudhoyono also lauded the performance of the IDX in 2009, which had emerged as the second best performer in Asia with a growth of 86.98 percent.

“I really thank and appreciate all the parties who have been working hard last year,” Yudhoyono said, following which he pressed the button to start this year’s trading.

The IDX is expected to be among the markets that will remain bullish this year due to the country’s strong economic fundamentals at a time when many economies are still suffering from recession.

The IDX closed the day with a rise of 41.06 points or 1.6 percent to stand at 2,575.41, the steepest increase since Nov.16, Bloomberg reported.

Finance Minister Sri Mulyani Indrawati said that stock market positive performance was achieved due to the government’s responsive actions to cushion the impacts of the global economic downturn.

Mulyani said the government’s measures in handling the crisis last year had succeeded in maintaining market confidence.

“As a result, we experienced a stable economy in 2009 which placed Indonesia as one of the very few countries in the world which were able to post positive growth despite the [global] crisis,” she said.

Indonesian economic conditions are stabilizing after the market collapse and turbulence as a result of the global financial crisis, which reached its peak by the end of 2008. The inflation rate in 2009 reached 2.78 percent year-on-year in December, the lowest inflation rate in a decade, while the rupiah remained stable at between Rp 9,400 and Rp 9,600 to the US dollar.

Low inflation may give the BI room to keep its benchmark interest rate at a record-low 6.5 percent when policy makers meet on Wednesday.

Chatib Basri, an adviser to the finance minister said the inflation rate was likely to reach 6 to 7 percent in 2010 assuming the rupiah remained stable at 9,800 to the dollar.

The economy would receive a boost from the expected rebound in exports which were expected to recover from a 15 percent fall in 2009 by the middle of the year, he said.

“Exports have begun to recover but still at a slow pace. The global economic crisis has eased but it will take time to impact on investment and export rates,” Chatib said.

Unlike exports, the investment rate has already regained ground and demonstrated positive growth.

“Investment is already going up, albeit slowly,” he said.