2001 growth target attainable: Econit

JAKARTA (JP): Despite an expected weaker export performance, the government could still achieve its 2001 economic growth target of 3-3.5 percent on the back of rapidly growing domestic consumption and gross investment, the private think tank Econit said on Tuesday.

Deputy managing director of the Jakarta-based advisory body Hendri Saprini said that the two indicators had been the main contributors to the country's economic growth during the first two quarters and the trend seemed to continue toward the next semester.

She explained that while net-export growth showed a declining trend in the first two quarters, domestic consumption, investment inflow and government spending grew at a comfortable rate of 8.38 percent in the second quarter of this year, compared to 4.69 percent in the same period last year.

Hendri said that the weaker export growth was mainly due to the economic slowdown in the country's major export destinations including Japan and the U.S.

She added, however, that the country's lack of competitiveness in the international market also played a part in the export growth downturn.

The expected the economic slowdown in the country's major trading partners had earlier raised concern that the government might not be able to meet its 2001 growth target.

As the current economic and political situation appears to be heading in the right direction, domestic consumption was expected to improve significantly in the second semester, Econit said.

It said that the highest growth for the year would likely occur in the last quarter, with two festivities: the Muslim new year, Idul Fitri, and Christmas celebrations falling in the same month.

Domestic consumption in the first and second quarter increased by 5.9 percent and 4.6 percent respectively, compared to the corresponding periods last year, Econit said.

Beside domestic consumption, gross investment would also play a crucial role in the country's economic recovery as it had been able to maintain its high growth of more than 15 percent for the last five quarters despite the political uncertainty during the period, Econit said.

Elsewhere, Hendri called on the government to take advantage of the above improving indicators.

"The real sector's performance in the first semester has been outstanding. The government should give full support by issuing more favorable policy," she told reporters.

"And the current tight money policy is certainly not helping," she added, referring to the much-criticized high interest rate policy of Bank Indonesia.

Bank Indonesia said earlier that it would maintain its tight monetary policy for the time being despite the month-on-month deflation of 0.21 percent in August, citing inflationary pressure remained a worry.

The interest rate for Bank Indonesia's one-month SBI promissory notes is currently at 17.67 percent.

"The interest rate at the moment is rather too high for the business community and I am hopeful that Bank Indonesia will evaluate their policy sometime soon," Hendri said.(10)