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UPDATE 2-INTERVIEW-Astraupbeat on Indonesia outlook

(recasts with economic outlook, adds details, quotes)

By Lily Kurniawati

JAKARTA, April 21 (Reuters) - Indonesia auto giant PT Astra International's chief executive said on Monday falling domestic interest rates and a stronger rupiah should underpin consumer demand this year in the world's fourth most populous country.

Astra president director Budi Setiadharma said the country's economic growth could be higher than the official forecast of four percent this year, helping the core auto business of Astra, which has revenue equivalent to about two percent of Indonesia's annual GDP.

"I feel the economy could grow higher than the government's estimate, helped by the sectors which are not well recorded by the government," he told Reuters in an interview on Monday.

Economists say Indonesia has a significant underground economy that goes untracked in official data.

Setiadharma said falling domestic interest rates, down by almost 170 basis points this year and 500 basis points last year, would help spur demand for cars as 55-60 percent of Astra sales were financed by credit. Astra, 35.05 percent owned by Singapore's Cycle & Carriage Ltd , said it would capitalise on the overall improved economic conditions to regain market share, currently at 42 percent from around 50 percent two years ago.

Describing one tactic Astra might try, Setiadharma said: "for example we can reduce spending on certain advertising and instead we can give discounts which can be enjoyed directly by consumers."

Indonesia posted the third-highest car sales among ASEAN countries last year, with a total of 360,081 units, including exports, and is considered to have the biggest potential market in the region with its population of some 210 million people.

But domestic car sales, a key barometer of the consumer spending power that has driven economic growth in recent years, are yet to return to levels of around 400,000 units seen before the Asian financial crisis in 1997-98.

Setiadharma also said a stronger rupiah, surging to a 10-month high on Monday reflecting stronger confidence on the country, should help ease the cost of servicing the company's around $1 billion in debts, mostly in foreign currencies.

HIGHER REVENUE

He said the country's improving economic outlook should help the company post three to four percent growth in revenue from last year's 30.3 trillion rupiah ($3.5 billion).

"We believe the 2003 interest expense will be far lower than 2002, thus we can pay dividend to shareholders. Under the debt restructuring, we are allowed to distribute 10 percent of the net profit," he said.

He also said Astra hopes to pay an interim dividend from 2003 earnings by the end of the year, but declined to elaborate.

"We have completed a debt restructuring, a rights issue and we are in talks with Toyota which are expected to finish in the third quarter," Setiadharma said.

Earlier this year Astra signed a memorandum of understanding in which it will lose its manufacturing control in the joint-venture unit PT Toyota Astra Motor to Japan's Toyota Motor Corp , but will retain the distribution business.

Some analysts estimated the deal could fetch Astra some $200 million. Currently Astra owns a 51 percent stake in Toyota Astra Motor and the remaining is held by Toyota.

Setiadharma also said Astra's net profit in the first three months, expected to be released at the end of the month, was "much better than budgeted". He declined to give details.

On Monday, Astra shares ended down 0.8 percent at 3,100 rupiah while the broader market was up 0.92 percent. ($1=8,675 rupiah)