16/02/2012 (Zamboanga Times)) - Indonesia, with a strong economic growth of 6.5 percent in 2011, has cut its growth expectations for 2012, amid fears that the global economic downturn will bite into the exports of the largest economy in Southeast Asia.

Deputy Finance Minister Anny Ratnawati said the government revised the growth target this year, down from 6.7 percent to a range of 6.5 to 6.6 percent, citing the global economic situation and the euro zone crisis.

The statement came after Indonesian central bank, the Bank Indonesia, cut its economic growth forecast to a lower rate of 6.3 percent from its original estimate of 6.7 percent this year.

Anny said due to the crisis, demand from the euro zone and the United States for Indonesian commodities may slow down. Besides, the impact of the crisis has rattled other economies that used to import Indonesia's commodities.

Indonesian Finance Minister Agus Martowardoyo said demand on Indonesia's commodity from China, one of the largest importers of Indonesia's commodities, also slowed. Indonesia has been exporting a great amount of coal, rubber and crude palm oil commodities to China in the last few years.

Export growth started to shrink since December when it posted a tiny increase of 2.2 percent year-on-year after gaining a 10.2 percent growth in November. The December growth was the smallest since September 2009, when exports plunged by 19 percent.

Indonesia saw 6.5 percent growth last year on the back of strong domestic demands and exports, making it grow higher than its peers in the region like Malaysia and Thailand. The growth that Indonesia recorded last year was the fastest since 1996.

Despite its proven resilience in dealing with the financial crisis in the past, international agencies have revised their growth forecast for Indonesia.

The IMF reduced its Indonesian growth estimation to 6.1 percent from the initial forecast of 6.3 percent this year. The Asian Development Bank (ADB) corrected its growth projection on Indonesia to 6.2 percent from an initial prediction at 6.8 percent.

On Thursday, Bank Indonesia unexpectedly cut its benchmark interest rate by 25 basis points to 5.75 percent following a decline of year-on-year inflation in January, to further drive the country's economic growth.

Increasing crude oil prices in international market and the country's failure in complying with its oil production target, are also among the challenges for Indonesia's long-term economic growth.

Analysts said, by cutting its expenditure on fuel subsidies, the government can free up more funds for improving infrastructure and upgrading the education system, which will in the long run help the economy.