RI ECONOMY MAY GROW ABOVE 5 PCT: ECONOMIST

Jakarta, Aug 3 (ANTARA) - Indonesia's economic growth may exceed the government-set target of 5 percent on the back of the expected global economic recovery next year, an economist said.

"The global economy particularly the US economy is expected to recover next year. This will have a positive impact on the national economy," Sri Adiningsih of the Yogyakarta-based Gadjah Mada University (UGM) said here on Monday.

She was responding to President Susilo Bambang Yudhoyono's state-of-the-nation address to introduce the government's financial note and the draft 2010 state budget before the parliament earlier in the day.

In his address, the head of state said he was optimistic the economy would grow by more than 5 percent.

Adiningsih said the global economy had yet to fully recover from the crisis as reflected by negative growth in a number of countries.

But this was not the case with the Indonesian economy which was projected to grow 4.5 percent in 2009, she said.

She said the global economic recovery would have the potential to increase the prices of primary products, particularly natural resources-based commodities, such as palm oil, minerals, oil and gas.

In the short run, Indonesia must focus on the implementation of the Asia Free Trade Agreement (AFTA) which would begin next year, she said.

The challenge would become greater as foreign products would easily enter the domestic market following the implementation of AFTA, she said.

"If our products cannot compete with foreign products and if the government cannot deal with illegally-imported goods, it will not be impossible the chance we will gain may destroy the domestic industry," she said.

Despite the global crisis, the domestic market remained unaffected thanks to the country's large population and productive labor force, she said.

After all, she said the global economic recovery might also increase the country's inflation rate.

In the draft 2010 state budget the government set the year-on-year inflation rate at 5 percent compared to 6 percent projected in the draft 2009 state budget.

"I think it is difficult to reach an inflation rate target of 5 percent. It is possible the inflation may exceed 7 percent," she said.