Economic Growth Tends To Drift Towards Lower Limit: BI

Jakarta, Aug 14 (Antara) - Bank Indonesia (BI) has forecast that the country`s economic growth will tend to veer towards the lower limit of its range set at 5.1-5.5 percent. "BI saw that the economic growth in 2014 is still in line with its prediction but tends to move towards the lower limit at 5.1 percent," the central bank`s Governor, Agus Martowardojo, stated at a press conference here on Thursday. He remarked that Indonesia`s economic growth in the second quarter was slow due to contraction in the growth of exports, especially of natural resource commodities. The economic growth in the second quarter was recorded at 5.12 percent year-on-year, down from 5.22 percent in the first quarter this year. Agus pointed out that the decline was caused by weak export performance of natural resource commodities such as coal, CPO, and minerals. "This was visible in the development of economies in the regions such as Sumatra and Kalimantan where mining and plantation commodities were mostly produced," he affirmed. In terms of domestic demand, he explained that the economic slowdown especially came from contraction in government spending due to suspension of social assistance and slow non-development investment activities. However, in the second quarter, the economy still received a positive push from the performance of household consumption, which remained strong due to election activities and people`s buying power, among others, which had been maintained in line with the decreasing inflation rate. "In the future, economic growth is predicted to be still moderated, especially by decreasing domestic demand despite prediction that the export performance will improve," he stated. In terms of global economy, based on BI`s assessment, the world`s economic recovery is still continuing, bolstered by economies in advanced countries in line with accommodating monetary policies and reducing fiscal pressures. "The recovery of the US economy, which is now growing stronger, is reflected by the upward revision of its GDP in the first quarter of 2014 in line with increasing investment, consumption, and the external sector," he added. Economic growth in the developing countries is forecast to be relatively limited, which will continue to drive a decline in commodity prices. Economic growth in China in the second quarter of 2014 rose as a result of a stimulus. Agus cautioned that the people should watch out for some global risks in the future, including normalization of the policies in the Fed and Bank of England as well as possible spillover and spill back from weaker economies in emerging markets.