The Asian Development Bank (ADB) has revised down its 2013 gross domestic product (GDP) growth forecast for Indonesia to 5.7 percent from 6.4 percent in April.

For 2014, growth will also be adjusted to 6.0 percent from the previous estimate of 6.6 percent, according to ADB’s annual economic publication – Asian Development Outlook 2013 (ADO 2013) released on October 2.

"As policies taken to address inflation and the current account deficit will restrain growth in the near term, the economy will be slower than anticipated,” said ADB’s Deputy Country Director for Indonesia, Edimon Ginting.

The institution has reminded Indonesia to continue improving its competitiveness in manufactured exports.
 
According to the Statistics Indonesia (BPS), the first-half growth in 2013 of 5.9 percent was below projections, with deceleration of fixed investment, decrease in government’s consumption, and inflation higher than anticipated due to a sharp rise in fuel prices.

Private consumption remained as the main driver of growth, the BPS said.

In the short term, ADO 2013 predicts the current fiscal and monetary measures that are implemented to ensure macroeconomic stability will take a toll on economic growth.

Higher inflation will also dampen private consumption in the coming months. Nevertheless, consumption growth is expected in 2014 when inflation subsides. Election-related spending during the upcoming parliamentary and presidential elections is also predicted to contribute to consumption in the first half of next year.

ADO 2013 also notes that Indonesia is now in a better position to respond to financial market volatility than it was during the 2008–2009 global financial crises.-VNA