Indonesia's economy will likely slow down this year, as soaring oil prices and a weakening rupiah are expected to continue fueling inflation and key interest rates to the point of decelerating growth in consumption, economists say.

Bank Mandiri chief economist Martin Panggabean is estimating that though the country's gross domestic product (GDP) will still be able to expand by 5.7 percent this year, higher than last year, it will unlikely grow as fast as the previous projection of 6 percent.

"We are seeing the downward trend in economic growth with consumption slowing down, albeit the ability of investments to keep their momentum," he was quoted Friday by The Jakarta Post as saying.

The Central Statistics Agency (BPS) reported that Indonesia's economy grew by 5.13 percent last year, and by 6.35 percent during this year's first quarter.

Martin explained that the downward trend is the result of two main factors recently at play: the surge in global oil prices, which broke the 65 US dollars barrier on Thursday, and the slide of the rupiah against the US dollar -- still hovering at the 9,800 level.

Both factors have put pressure on the state budget financing of the fuel subsidy allocation, pushing the government to cut the burden of these subsidies by raising domestic fuel prices.

Sharing a similar view, Standard Chartered economist Fauzi Ichsan is also predicting that Indonesia's economy will only be able to grow by 5.7 percent this year, on oil price and rupiah volatility.

Fauzi sees the country's inflation rate could reach 7.8 percent by the year's end as a result, with the central bank's one-month SBI reaching 9.25 percent and the rupiah ending up at 9,500 to the dollar.

Source: Xinhua