(Insider News) - Indonesia Finance Minister estimated that the economy expanded 6.1% in the first half, down from last year’s 6.2 percent, shows by the decline in capital goods imports and investment slowed due to higher costs of importing capital goods and raw materials.

Imports of capital goods, a leading indicator for investment, contracted by 17% in the January-May period to $13.2 billion from a year earlier, according to the Central Statistics Agency (BPS).

But Basri said he forecast the country could still grow 6.3% this year, as targeted by the government, on expectations of large state spending during the second half.

Basri told the House that the budget deficit was at 0.58% of GDP in the first half of 2013 and would increase in the second half to 1.8%, which is lower than government’s target of 2.3% of GDP for this year.

To boost investment in the second half, the government will simplify rules on investment such as by relaxing the negative list and the rules of the tax holiday, He said, who also heads the Investment Coordinating Board (BKPM).

According to IDX's report, foreign fund has pulled out from stock and bonds market arround US$4 billion while demand of Indonesia companies US$3 billion to finance their purposes.