'Weakening consumption poses a threat to economic growth'<\/p>\n
A'an Suryana, The Jakarta Post, Jakarta<\/p>\n
Analysts are divided on whether the latest data on a decline
\nin sales of electronic goods and cigarettes indicates a weakening
\nof domestic consumption.<\/p>\n
Centre for Strategic and International Studies (CSIS)
\neconomist Pande Radja Silalahi said falling sales were a strong
\nindication that consumption was weakening, which could become a
\nserious threat to this year's economic growth if the trend
\ncontinued.<\/p>\n
He said that people were reluctant to spend money on durable
\ngoods because they were pessimistic about the performance of the
\neconomy, particularly in the area of investment and exports.<\/p>\n
\"Weakening consumer spending reflects popular pessimism over
\nthe country's economic performance,\" Pande told The Jakarta Post
\non Sunday.<\/p>\n
\"In view of the lackluster performance people then choose to
\nsave their money rather than spend it on durable goods,\" he
\nadded.<\/p>\n
This paper recently quoted data from an association
\nrepresenting electronics businesses that sales of electronic
\ngoods during the month of July and August had declined by up to
\n26 percent. Industry experts have said that massive layoffs have
\nweakened consumer purchasing power, which, in turn, has hit sales
\nof electronic goods.<\/p>\n
Sales of cigarettes have also been on a downward trend, with
\nfull-year sales figures expected to drop by 20 percent from last
\nyear's 206 billion sticks, according to the industry association.<\/p>\n
This data has triggered concern that domestic consumption,
\nwhich was expected to become the main driver of this year's
\neconomic growth, is waning.<\/p>\n
The government has projected this year's growth at 4 percent.<\/p>\n
The Asian Development Bank, in its 2002 Outlook Update report,
\nalso highlighted weakening consumption in the country.<\/p>\n
According to one estimate, domestic consumption is expected to
\ncontribute around 75 percent of the country's gross domestic
\nproduct (GDP).<\/p>\n
However, Standard Chartered Bank economist Fauzi Ichsan said
\nthat it was too early to tell whether declining sales in
\nelectronic goods and cigarettes were signs of slowing domestic
\nconsumption.<\/p>\n
\"We must be careful before jumping to such a conclusion,\" said
\nFauzi.<\/p>\n
\"If the decline (in sales) occurs for three months
\n(consecutively), it might be true that the consumer spending is
\nweakening,\" he added.<\/p>\n
He agreed, however, that weakening domestic consumption could
\npresent a serious threat to the economy.<\/p>\n
Meanwhile, Pande urged the government to immediately improve
\nthe domestic investment climate so that companies would start
\nmaking new investment, which, in turn, could revive public
\nconfidence in the economy and help push up sales of durable
\ngoods.<\/p>\n
\"The government must move quickly to address legal
\nuncertainties here,\" he said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/weakening-consumption-poses-a-threat-to-economic-growth-1447893297",
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