By Linda Silaen

JAKARTA--Indonesia expects an uptick in economic growth next year, helped by improving exports and a pick-up in investments.

President Susilo Bambang Yudhoyono told parliament on Friday that the government forecasts gross domestic product to expand 5.6% next year, slightly higher than between 5.1% and 5.5% growth expected this year.

Indonesia is settling for slower economic growth as it battles a persistent current-account deficit while tighter regulations on mineral exports have created an extra drag. Still, a recent deal with mining giant Freeport-McMoRan Inc. (FCX) is expected to boost exports going forward.

Inflation is expected to ease to 4.4% next year, while the rupiah exchange rate will likely be weaker, averaging 11,900 rupiah to a dollar.

Oil output may reach 845,000 barrels a day, higher than 818,000 estimated this year. Indonesia requires more oil than it produces, making the former member of the Organization of Petroleum Exporting Countries a net oil importer.

Indonesian Crude Prices, the benchmark price used for oil exports and imports, will likely average $105 a barrel, steady with this year.

Still, energy subsidies are forecast to be higher at 363.5 trillion rupiah ($31 billion), or 18% of total spending, compared with IDR350.3 trillion budgeted for this year.

The budget deficit is estimated to hit IDR257.6 trillion, equal to 2.3% of gross domestic product and slightly lower from the 2.4% of GDP expected for 2014.

Separately, Indonesia Finance Minister Chatib Basri said the country's gross bond issuance for next year is forecast around IDR400 trillion.

Parliamentary commissions will start debating the 2015 budget draft in coming weeks. The final budget may differ from Friday's estimates as Mr. Yudhoyono has invited President-elect Joko Widodo to incorporate his programs once the Constitutional Court issued its verdict on a legal challenge launched by rival Prabowo Subianto. The court's verdict is expected next week.

Write to Linda Silaen at linda.silaen@wsj.com

(END) Dow Jones Newswires

August 15, 2014 05:55 ET (09:55 GMT)

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