JAKARTA, Indonesia-Will Indonesia wave goodbye this year to an economic growth rate strong enough to create jobs and reduce poverty?

EPA
An Indonesian laborer, pictured July 1, works on a construction site in Jakarta.

Two economists - one from the World Bank, the other from Indonesia - came up with different answers on Tuesday. Which economist turns out to be right is critical to a Southeast Asian country where about half of the population of 240 million lives on $2 a day.

The key figure is 6% - the rate considered by many as needed for Indonesia to spur employment and help people get out of poverty. The World Bank had earlier said Indonesia would hit 6.2% for the year. Now it is saying Indonesia will only reach 5.9%.

"Maintaining flexible, yet predictable and well-communicated macroeconomic policies will help Indonesia navigate through this period of significant uncertainty," World Bank lead economist Ndiame Diop said at the Tuesday launch of the bank's Indonesian Economic Quarterly report.

But Purbaya Yudhi Sadewa, an adviser to Indonesia's chief economic minister, called the likelihood "slim" that the country would fall below 6%, predicting instead a 6.1% growth rate this year.

That's still lower than the Indonesian government's projection of 6.3% growth this year, a slight uptick from last year's 6.2%.

Indonesia booked an above 6% expansion rate in five out of the past six year, managing a 4.5% growth in 2009 when many countries slumped into recession.

The World Bank contended in its Tuesday report that a spike in inflation-it estimates prices to rise by 7.2% this year- following last month's steep fuel price hike and corrections across the financial markets' assets "have added to the headwinds to domestic demand."

Indonesia, Southeast Asia's largest economy, is a major exporter of key commodities such as palm oil, rubber, coal and tin. But unlike many of its Asian peers, the Indonesian economy is primarily domestically focused, with household consumption accounting for more than half of its gross domestic product.

Mr. Sadewa, who is also the chief economist at the state-owned securities firm Danareksa, predicted that consumer confidence will likely remain steady in coming months and that greater government spending ahead of 2014 election will provide an extra boost.

By Andreas Ismar

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