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WB: Indonesia's Economic Growth May Slow to 4.4% in 2009

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The World Bank has forecast that Indonesia's economic growth may fall to 4.4 percent next year, as the global economic downturn eases the country's export and investment, a paper said on Thursday.

The figure is more pessimistic than the central bank prediction of 4.5 percent, according to the Jakarta globe daily.

The global economic downturn expected to tilt into a recession next year would be felt the most at the first quarter next year, an Indonesian official has said.

Exports of the Southeast Asia's largest economy have started to slump since October as global financial crisis has sapped demand and prices of palm oil, copper, coffee and iron, the main commodities exported by Indonesia, the statistic agency has said. Crude palm oil is the country's biggest export by value.

Indonesia's overseas sales weakened by 11.61 percent to US$10.81 billion in October compared to those in September, it said.

The country's central bank and the government predicted that this year's economy would grow by 6 percent and flag the possibility of further slowing down.

The bank sees that inflation will end at 6.5 to 7.5 percent next year. In November the inflation rate slowed to 11.68 percent due to weakening of prices of energy and food.

To face with the slowdown next year, the central bank on Dec. 4 cut the rate by 25 basis points to boost activity in real sector. The government has created new infrastructure projects and speed up implementing already planned projects to provide more jobs.

Another step to boost purchasing power is reducing oil prices. The government on December 1 slashed subsidized-gasoline price by 8.3 percent to 5,500 rupiah (some US$0.51) per litter following the falling of the global oil price to below nearly US$40 a barrel after a record high of about US$147 on July 11.

The government plans to make another cut on oil price next year as the country heads to direct presidential and legislative polls.

The government expects to use over US$5 billion standby loans secured from Japan, Australia, the World Bank and the Asian Development Bank to plug budget deficit of around 52.7 trillion rupiah (US$4.37 billion) in 2009, following the country's plan to cut bond sales by a third due to the seeping of investors appetite.

The World Bank further forecast that that Indonesia's investment growth could be flat in 2009, before recovering to around 7 percent in 2010.

(Xinhua News Agency December 11, 2008)