ECONOMIC CONDITIONS EC83A63C E3BD 46D3 927D 5125402EAFFD AR2006 English

These consolidated financial statements are originally issued in Indonesian language. PT BANK MANDIRI PERSERO TBK. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year Ended December 31, 2006 With Comparative Figures For 2005 Expressed in millions of Rupiah, unless otherwise stated 133

57. ECONOMIC CONDITIONS

The Indonesian economy has shown improvement along with macro economic stability and sustainable finance in the second half of 2006. The 6.1 economic growth in the forth quarter was supported with high government expenditure and improvement in export activities. Macro stability was maintained with decrease in inflation and stability of Rupiah exchange rate around 9,000 – 9,200 per United States dollar. With this development and considering the economic monetary prospect, Bank Indonesia continued to decrease the BI rate to 9.75. The hope for further improvement in Indonesian economy is supported by the banking industry. In December 2006, loan disbursements have shown improvement with increasing bank loans growth along with decreasing non-performing loans NPL. Monetary policy in maintaining the price stability and the government efforts in increasing the infrastructure development, driving the real sector, and improving the investment environment, will continue to encourage economic improvement. This optimism is believed to be able to drive the economic growth and Indonesian banking performance in 2007. The consolidated financial statements included the impact of economic condition to the extent they can be determined and estimated. The economic recovery to a healthy and stable condition depends largely on fiscal and monetary policies that the government of Republic of Indonesia continue to make an effort to, actions which are beyond the control of the Bank and subsidiaries. Therefore, it is not possible to determine the future impact of the economic condition on the liquidity and earnings of Bank Mandiri and subsidiaries and realization of assets, including influence from customers, creditors, shareholders, and other stakeholders. The effect of the uncertainty on the assets and liabilities reported in the current balance sheet cannot be estimated. The effect will be reported in the consolidated financial statements when it can be identified and estimated.

58. GOVERNMENT GUARANTEE OF OBLIGATIONS OF LOCALLY INCORPORATED BANKS