Indef, LIPI see moderate growth for next year<\/p>\n
Fitri Wulandari, The Jakarta Post, Jakarta<\/p>\n
The country's economic growth is projected to remain at a
\nmoderate level of around 4 percent next year as uncertainty
\nduring the seven-month voting and campaigning periods will cause
\ninvestment to remain weak.<\/p>\n
The Institute for Development of Economics and Finance (Indef)
\npredicted the economy to grow by between 4.2 and 4.4 percent in
\n2004, which is lower than the government's projection of 4.8
\npercent.<\/p>\n
Meanwhile, the state-sponsored Indonesian Science Institute
\n(LIPI) said that if the general election process was not smooth,
\nthe economy would only grow by 4 percent, which is the same level
\nestimated for this year.<\/p>\n
Indef economist Drajad Wibowo said in a press conference on
\nTuesday that domestic consumption would continue to be the main
\nengine of next year's economic growth, as investment and exports
\nwould remain weak.<\/p>\n
Indef predicts political parties could spend around Rp 15
\ntrillion next year on campaigning and other activities. This
\nlarge amount of money will eventually mean a boost in domestic
\nconsumption.<\/p>\n
He said that investment may only start to enter the country in
\nthe second half of next year, assuming that the election process
\ngoes well.<\/p>\n
\"Indonesia (economy) would grow by 3.9 percent if there is no
\ninvestment coming in next year,\" Drajad said.<\/p>\n
He added that export would also remain weak as local
\nbusinesses would tend to focus on trading goods in the domestic
\nmarket instead producing goods for the export market as
\ncompetition from China and Vietnam becomes tougher. This is
\ndespite the expected recovery in the global economy, which should
\nincrease demands for export products.<\/p>\n
For the past couple of years, the country's economy has been
\nmainly driven by domestic consumption due to the weak performance
\nof the investment and export sectors. Investors have been
\ngenerally reluctant to pour in fresh money into the country due
\nto a host of problems at home such as corruption, poor
\ninfrastructure, lingering labor conflicts and lack of faith in
\nthe judiciary.<\/p>\n
During the first nine months of this year, capital formation
\n(a measure of investment) was 25 percent lower than the level
\nprior to the 1997 economic crisis.<\/p>\n
But LIPI's economist Wijaya Adi said that there was also a
\npossibility for the economy to grow by 5.4 percent next year
\nparticularly if the elections go very well.<\/p>\n
He said that under such a scenario, the current trend of
\nincreasing stability in macro-economic indicators would push
\nhouseholds and businesses to become more optimistic about the
\neconomy, thus triggering higher investment.<\/p>\n
On the external front, the expected recovery in the economies
\nof developed nations (export destinations for many local
\nproducts) will also bode well for exports.<\/p>\n
In the worst case scenario, if the election disappoints the
\npeople and there is social unrest, the economy will slow way
\ndown, while inflation will increase and the rupiah will weaken.<\/p>\n
During the past year, the country's macroeconomic indicators
\nhave improved as evidenced by the low inflation, stronger rupiah
\nagainst the U.S. dollar and declining interest rates.<\/p>\n
Both Indef and LIPI warned of the possible worsening
\nunemployment problem next year, particularly if the economy grows
\ntoo slow.<\/p>\n
LIPI predicted that full unemployment this year would be 10.3
\nmillion people, a 14 percent increase from last year's 9.1
\nmillion. Next year the number could grow to 10.75 million
\njobless.<\/p>\n
Economic indicators for 2004<\/p>\n
Indef LIPI<\/p>\n
GDP(%) 4.2 - 4.4 4.8 - 5.4<\/p>\n
Inflation rate(%) 5.5 - 7.0 6.4<\/p>\n
Interest rate(%) 8.4 - 9.0 8 - 8.84 (3-month BI)<\/p>\n
Exchange rate(Rp) 8,400 - 8,700 8,000 - 8,300<\/p>\n
Open unemployment (millions) 10.5-10.8 ---<\/p>\n
Population Below Poverty Line (%) 17.7-18.0<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/indef-lipi-see-moderate-growth-for-next-year-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }