Indonesia finance minister sees Q1 GDP growth at 5.7-5.8pct

Indonesia's economy likely expanded between 5.7-5.8 per cent in the first quarter from a year ago, the finance minister said on Thursday, thanks to strong domestic consumption and a pick up in investment.

Sri Mulyani Indrawati's forecast is in line with the central bank's prediction in a report on April 6 that first-quarter GDP growth would reach 5.7 per cent on the back of strong exports and domestic consumption.

Separately, on the sidelines of an infrastructure conference in Jakarta, Economics Minister Hatta Rajasa said full-year 2010 GDP growth was also seen at 5.7 per cent, versus 4.5 per cent in 2009.

Investor appetite for stocks and bonds in Southeast Asia's biggest economy has been particularly strong over the past year thanks to a combination of accelerating growth, relatively low inflation, political stability, and prospects for an investment grade credit rating.

"Consumption and investment start to pick up," Indrawati told reporters at a conference in Bali, when asked what were the main drivers for growth in the first quarter.

"We will maintain people's purchasing power as one of the elements for growth. We will also pump up investment and exports," Rajasa said separately.

The benchmark stock index set an all-time high earlier this month and is up 14 per cent so far this year, making Jakarta Asia's top-performing stock market.

The rally has prompted a flurry of deals including share placements for cement giant PT Semen Gresik and mobile phone operator XL Axiata, as well as plans for initial public offerings and rights issues.

PT Bumi Resources, Indonesia's biggest coal producer, wants to list its non-coal mining assets which it values at $1.9bn, in a $1bn initial public offering later this year, sources told Reuters this week.

Foreign investors have snapped up government bonds, lured by relatively low inflation, high yields, and expectations of a ratings upgrade.

The surge of foreign interest has driven the rupiah currency up 4.72 per cent against the dollar, making it the third-best performing currency this year after the Malaysian ringgit and Korean won.

Investor interest remains strong as the Indonesian authorities have steadily lifted their forecasts for growth this year on the back of strong demand for Indonesia's natural resources and improving domestic consumption.

In March, Indrawati had forecast first-quarter growth of 5.3-5.5 per cent.

Darmin Nasution, the senior deputy central bank governor, on Friday said that Indonesia's economy was likely to expand at the upper end of Bank Indonesia's 5.5-6.0 per cent forecast range this year.

Southeast Asia's biggest economy was one of the few Asian countries to post positive growth last year, thanks to steady domestic demand and a lower dependence on exports.