Growth slackening<\/p>\n
The Central Bureau of Statistics (BPS) reported last week
\nIndonesia's economy grew by only 3.92 percent in terms of real
\ngross domestic product in the third quarter, bringing cumulative
\ngrowth during the first three quarters of this year to a mere
\n3.39 percent.<\/p>\n
The growth figures simply confirmed what most analysts have
\npredicted over the past few weeks. Bank Indonesia (central bank),
\nfor example, revealed early last month that consumer demand, the
\ncountry's main engine of growth, was faltering while exports
\ncontinued to fall and investment remained very weak.<\/p>\n
With only modest prospects for broad economic growth, even
\nlocal demand appears to look fragile as consumers are worried
\nabout the chance of losing jobs. Consumption expanded by 6.3
\npercent (year-on-year) in the second quarter as consumers reacted
\npositively to the newly found economic and political stability.<\/p>\n
This consumption growth also seemed to have been fueled by
\nrapidly rising formal wages and strong growth in consumer credit.
\nBut consumer demand slackened to 4.9 percent in the third
\nquarter. The Bali bomb blast could accelerate the slowdown in
\nconsumer demand as the tragedy may affect consumer confidence,
\nalthough the decline would not be so steep in view of the
\nseasonal surge in consumption during the Idul Fitri and Christmas
\nholidays.<\/p>\n
Growth in the fourth quarter would have to be more than 6
\npercent to meet the official growth target, but after the Bali
\nbomb blast this prospect seems unlikely. No wonder, BPS further
\nendorsed the central bank's prediction that the government's
\nfull-year growth target of 4 percent this year appeared
\nunreachable.<\/p>\n
The World Bank was also downbeat about economic prospects. In
\nits latest assessment of Indonesia, after the bomb attack in
\nBali, the World Bank foresaw the economy would be able to expand
\nby only 3.2 percent this year, lower than the 3.3 percent growth
\nin 2001 and 4.9 percent in 2000.<\/p>\n
This means that unemployment would increase and poverty
\nreduction stall.<\/p>\n
This development is worrisome indeed as it shows how the
\ncountry has lost the momentum for high growth.<\/p>\n
Strengthening macroeconomic and political stability and
\nreinvigorated structural reforms from early this year had
\nimproved market confidence, which allowed for a stronger rupiah
\nand lower interest rates. But as the latest data has confirmed,
\nthis stability did not translate into robust growth.<\/p>\n
Some analysts may consider this prediction too pessimistic,
\npointing out the steady expansion in the demand for electricity
\nand cement, which indicates a high level of economic activity.<\/p>\n
True, the BPS statistics might not have captured all growth in
\nthe economy, especially the operations of small- and medium-scale
\nenterprises. The high expansion in lending to small- and medium-
\nscale businesses also served to rebut the too pessimistic
\noutlook.<\/p>\n
Despite the slight difference in the assessment of the
\neconomic outlook, the bottom line is clearly not encouraging at
\nall. The growth prospect is dampening this year and next year,
\nespecially because imports continue to decline, which means that
\nexports will likely remain weak.<\/p>\n
The Bali attack will increase the incidence of poverty and
\nwill have a more widespread, national impact through a slowdown
\nin GDP growth and the depreciation of the rupiah, and their
\nnegative repercussions on inflation, interest rates and the state
\nbudget burden, with a resultant impact on debt servicing.<\/p>\n
The government is preparing a big stimulus for reinvigorating
\neconomic activities next year. While this pump priming is badly
\nneeded, it is not sufficient to achieve even the modest growth
\ntarget of 4 percent for 2003. Private sector activities should be
\nenergized as well.<\/p>\n
Most importantly, the government should accelerate reforms to
\noffset the setback caused by the Bali bomb blast, strengthen
\npolicy coherence and conclude more credible deals related to
\nasset recovery and privatization in order to regain market
\nconfidence in the economy.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/growth-slackening-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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