BI Deputy Governor Hartadi A Sarwono saod here on Thursday the country`s economic prospects would be better than initially forecast.
"While domestic demand remains strong growth will be driven particularly by external factors in line with global economic recovery as seen from increasing exports since the fourth quarter last year," he said.
He said signs of global economic recovery were clearly seen in various economic indicators in advanced countries (US and Japan) or in Asia (China and India).
In the US recovery was reflected in increasing consumption responded to by increasing production.
In Japan it was shown by positive growth in the last quarter of 2009.
In China and India the indications are reflected by high economic growth.
The recovery will impact positively on their partner countries including Indonesia, he said.
He said the global economic recovery impacted positively on the development of the country`s external economic sector.
Indonesia`s non-oil/non-gas exports in the fourth quarter of 2009 were recorded up 17 percent and they continued to increase in January this year.
Increases not only happened in mining and agricultural product exports but also in manufacturing product exports.
The development made industrial and trade sectors grow higher than initally expected.
He said imports also rose in line with the export hike although still slightly.
Transactions in the first quarter this year are predicted to give a bigger surplus than initially projected.
He said foreign investors` confidence on the country`s economic prospects continued to be better as reflected by the surplus in capital and financial transactions which still remained high.
Based on all the developments the surplus in the Indonesian Balance of Payment (NPI) for 2010 is predicted to be higher than initially projected.
"One notch left for Indonesia to achieve an investment grade that would give more confidence to foreign investors to increase their investment in Indonesia," he said responding to improved ratings for Indonesia by Fitch to BB+ from BB earlier.
Besides the improving export performance private consumption also showed an improvement, confirmed by various indicators such as imports of consumer goods, car and motorbike sales and retail sales.
In the future, the household consumption is predicted to keep increasing in line with higher income as a result of income effect from improvement in exports and maintained consumers` confidence.
On the price side inflation pressure is believed not to be significant at least in the first semester this year.
The rate of inflation in the first two months this year remains low.
The relatively controlled inflation rate is also reflected by the core inflation rate which is down from 4.43 percent (year on year) in January 2010 to 3.88 percent in February.
The rise in the consumer price index early this year was proven to be mere temporary especially because of the rising price of rice and beliefs that no price hikes will happen in the next few months due to the arrival of harvest seasons in various regions.
The possibility of an electricity price hike is also believed not to give a big impact on inflation so long as it is implemented only on big customers.
So on the whole future inflation is believed to remain at 5 plus and minus 1 percent in 2010 and 2011. "Although the domestic economic activity is rising I believe it will not surpass the potential output level so that it will not cause over inflation pressure," he said.
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