Indonesia GDP May Grow 5% This Year, Sri Mulyani Says

By Shamim Adam and Haslinda Amin

Jan. 6 (Bloomberg) -- Indonesia’s economy may expand about 5 percent in 2009 as the government’s stimulus package and election-year spending stokes demand, Finance Minister Sri Mulyani Indrawati said.

Demand for Indonesian exports will probably slow this year as a global recession curbs orders from the Southeast Asian nation’s biggest markets, Sri Mulyani said in an interview in Singapore today. She expects the economy to grow between 4.5 percent and 5.5 percent this year after expanding about 6 percent in 2008.

President Susilo Bambang Yudhoyono, who is eligible for re-election this year, yesterday announced plans to spend an extra 50 trillion rupiah ($4.5 billion) to help sustain economic growth. The focus of the additional expenditure is to prevent unemployment, Sri Mulyani said.

“The challenge is to compensate for the effect of the global financial crisis on export activity and investment,” Sri Mulyani said. The elections “will stimulate demand. With the global price trend declining both on oil and food, we can maintain the purchasing power of households in Indonesia.”

Asian economies are slowing as demand for their products erodes amid recessions in the U.S., Japan and Europe. Exports account for about 32 percent of Asia’s gross domestic product, according to the World Bank.

Bond Market

The decline in export demand won’t “sharply correct” Indonesia’s expansion because overseas shipments account for less than a fifth of growth, Sri Mulyani said.

The government will tap international bond markets when appetite for risk improves and funding costs are lower, the finance minister said. She declined to say how much debt the government plans to sell.

“The preparations for bond issuance are there but we are not looking for a transaction at all costs,” Sri Mulyani said.

Indonesia’s government revenues are helped by an increase in tax collections which will help cushion the economy during the slowdown, she said.

To contact the reporters on this story: Shamim Adam in Singapore at sadam2@bloomberg.net; Haslinda Amin in Singapore at hamin1@bloomberg.net