Bank Indonesia sees 2002 consumption growth slowing<\/p>\n
Berni K. Moestafa, The Jakarta Post, Jakarta<\/p>\n
Bank Indonesia announced on Tuesday that it expected
\nconsumption growth in 2002 to weaken from the impact of a high
\ninflation rate, but said an upturn in exports and domestic
\ninvestment might offset the drop and preserve the country's
\neconomic growth.<\/p>\n
Assuming that domestic consumption remained robust, the
\ncentral bank said Indonesia's economy could grow by 3.5 percent
\nto 4 percent.<\/p>\n
\"The economic prospects for Indonesia in the year 2002 depends
\nvery much on the potency of growth of the domestic economy,\"
\nGovernor of Bank Indonesia Sjahril Sabirin told reporters,
\nquoting the results from a meeting of the central bank's board of
\ngovernors this month.<\/p>\n
The government is betting on strong consumption growth to
\njustify its prognosis that the economy will expand by 4 percent
\nthis year.<\/p>\n
Export sales, which drove economic growth in 1999 and 2000,
\nhave fallen in line with the downturn in the global economy.<\/p>\n
But as the country increasingly relies on local consumption,
\nthe sustainability of consumer spending has come under scrutiny.<\/p>\n
Some economists believe the previous two years of strong
\nconsumption have been fueled by pent-up demand, which over the
\npast few months has shown signs of fatigue.<\/p>\n
\"We expect consumption will not grow at the same rate as it
\ndid last year, but it will grow nonetheless,\" Sjahril said.<\/p>\n
This would come based on the central bank's projection that
\ninflation would remain high and hurt consumer spending.<\/p>\n
The government-planned price hikes of key commodities such as
\nfuel, power and telephone rates is expected to push inflation by
\none percent this month, from 0.33 percent the same month last
\nyear.<\/p>\n
Inflation has also been spurred by a weaker rupiah, as it
\npushed up prices of products depending on imported raw materials.<\/p>\n
Inflation for 2001 had been 12.55 percent, with the government
\nhoping to contain the rate to nine percent this year.<\/p>\n
Aiming for a low single digit inflation rate is difficult,
\naccording to Sjahril.<\/p>\n
He said Bank Indonesia's inflation target, of between nine
\npercent and 10 percent, was \"reasonable enough\".<\/p>\n
As domestic consumption may not sustain its previous levels,
\nBank Indonesia expects to balance the fall from higher exports
\nand domestic investment.<\/p>\n
Sjahril said Indonesia could expect a late upswing in export
\nsales this year, as the world economy is expected to recover, led
\nby Indonesia's largest export destination, the U.S.<\/p>\n
Several industry indicators in the U.S. point toward a
\nrecovery, which could come sometime in the second half of 2002.<\/p>\n
On the investment side, Sjahril expected domestic investors to
\nmaintain their lead over foreign investors.<\/p>\n
Government data shows foreign investment approvals as of last
\nOct. fell to US$6.5 billion, a near 50 percent drop from 2000.<\/p>\n
By contrast, domestic investment approvals rose to Rp 71
\ntrillion ($6.8 billion), up 61 percent in the same period.<\/p>\n
Sjahril said small and medium size enterprises would likely
\ncontinue to make up the bulk of investment made in this country.<\/p>\n
\"Of last year's loan commitments of Rp 122 trillion, much had
\ncome from small-and-medium-sized enterprises,\" he said.<\/p>\n
As only Rp 47.7 trillion had been realized by last November,
\nhe explained, some of the approved loans would likely be realized
\nthis year.<\/p>\n
Bank Indonesia deputy governor Maman Sumantri has said the
\nrealization of new loans this year might hit Rp 62 trillion,
\nmainly on growing loan demands from small and medium enterprises.<\/p>\n
Sjahril added that Indonesia could expect a larger investment
\nboost, once large companies began borrowing again.<\/p>\n
These companies had been the worst hit since the 1997
\nfinancial crisis bloated their foreign denominated loans in
\nrupiah terms.<\/p>\n
The Indonesian Bank Restructuring Agency (IBRA) took over the
\nbad loans from local banks. Sjahril said that the return of the
\nloans by the IBRA to the banking sector was crucial to revitalize
\nlarge corporate investment activities.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bank-indonesia-sees-2002-consumption-growth-slowing-1447893297",
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