RI may be heading for another sluggish year<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
Indonesia may be heading for another sluggish year in 2003 as
\neconomists warned of weakening consumption growth, and a
\nprolonged slump in investments and export sales to impinge on
\neconomic growth, following the Oct. 12 terrorist strike.<\/p>\n
A longer than expected slump in the world economy, they added,
\nmeant that Indonesia could not count on recovering export sales
\nor investments just yet.<\/p>\n
Economist Marie Pangestu said that domestic consumption -- the
\nbackbone of Indonesia's economy -- was faltering and that neither
\ninvestment nor exports were recovering to offset the slower
\ngrowth.<\/p>\n
\"Consumption growth is slowing, so we can't expect much from
\ninvestments, and while we still have exports, it may be affected
\nif security is low,\" said Marie of the Centre for Strategy and
\nInternational Studies (CSIS) on the sidelines of a seminar on
\nTuesday.<\/p>\n
Indonesia was hoping earlier this year for an upturn in the
\nglobal economy that would drive up exports sales and increase the
\ninflow of capital.<\/p>\n
But the accounting scandals that have hurt Wall Street and the
\nthreat of war in the Middle East are extending the global
\neconomic slump.<\/p>\n
Indonesia's already bleak outlook turned for the worse when
\nthe Oct. 12 bombing in Bali crushed the tourism sector.<\/p>\n
Discounting the economic boost from tourism, economists have
\ncut their economic growth forecasts for this year by 0.2 to 0.3
\npercent to an average of 3.5 percent and said growth would not
\nlikely meet the government's targeted 5 percent for next year.<\/p>\n
Indonesia's economy, however, needs to grow by at least 5
\npercent to 7 percent a year to provide enough jobs to slash the
\nmassive unemployment rate and to lift millions out of poverty.<\/p>\n
An expanding economy is also vital to reduce the debt burden
\non the state budget where more than 40 percent of public funding
\nis spent on paying debts instead of crucial development spending.<\/p>\n
So far the government remains upbeat on its 5 percent economic
\ngrowth target, citing that domestic consumption accounted for 3
\npercent and that it would continue to grow as the population
\nincreased.<\/p>\n
Marie, however, said that the government's assumption was hard
\nto meet as the underlying drive factor was slowing and greater
\npolitical instability ahead of the 2004 general election would
\nlikely dampen business confidence.<\/p>\n
She said that prior to the Oct. 12 bombing, the business
\ncommunity assumed the economy would neither improve nor
\ndeteriorate until after the 2004 general election reinstalled
\npolitical stability.<\/p>\n
\"Now that calculation has changed in a sense that it could get
\nworse and that this is a possibility,\" she said.<\/p>\n
Standard Chartered Bank economists shared their concerns on
\nWednesday of a weaker outlook for next year.<\/p>\n
\"Consumers are absolutely the key to the whole economic
\nenvironment,\" said the bank's Southeast Asia chief economist,
\nSteve Brice, following a Wednesday seminar on the economy.<\/p>\n
Consumer confidence was shaken after the Oct. 12 bombing and
\nBrice said that the government should watch out for indicators
\nlike car sales, electronic sales to measure the extent of a
\npossible plunge in spending.<\/p>\n
Standard Chartered economist Fauzi Ichsan said that domestic
\nconsumption contributed 74 percent to economic growth, followed
\nby 17 percent from investments and the rest from exports.<\/p>\n
To maintain consumption growth, he said, the economy needed
\njob creating investments to prevent a weaker rupiah from stoking
\nthe inflation rates.<\/p>\n
Fauzi added that post-Oct. 12, investors were also looking
\ninto security aside from legal certainty and political stability
\nbefore coming here.<\/p>",
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