2003 GDP growth slightly exceeds official target

2003 GDP growth slightly exceeds official target

Dadan Wijaksana, The Jakarta Post, Jakarta

Despite the Severe Acute Respiratory Syndrome (SARS) outbreak,
and terrorist attacks at home, the economy recorded a 4.1 percent
growth last year, higher than the 2002 growth rate and slightly
higher than the official target, the Central Statistics Agency
(BPS) reported on Monday.

The BPS said domestic consumption continued to be the main
driver of economic growth, accounting for around 78 percent of
the gross domestic product (GDP), or the value of goods and
services produced throughout the year.

The government targeted economic growth at 4 percent for 2003,
compared to the 3.77 percent growth recorded in 2002.

Initially, doubts lingered as to whether economic growth could
accelerate to 4 percent, due to the SARS outbreak epidemic in the
first quarter and the deadly Marriott Hotel bombing in August --
both of which threatened the tourist industry, a major source of
foreign exchange revenues, and dampened consumer and business
sentiment.

But the government moved quickly to fix the situation by
providing business incentives and encouraged people to spend more
money.

Analysts said earlier that relatively benign inflation and low
interest rate environment -- thanks mainly to the falling value
of the U.S. dollar and global interest rates -- had contributed
to stronger consumer spending power as banks boosted loans for
the purchase of houses, cars and motorcycles.

Bank Indonesia had lowered its benchmark interest rate to 8.31
percent by the end of 2003, from nearly 13 percent in the
beginning of the year, while inflation had dropped to 5.02
percent from more than 10 percent in 2002.

The BPS also noted slight improvements in investment and
export: private consumption grew by 4.02 percent last year and
government consumption rose by 9.84 percent, exports of products
and services rose by 4.04 percent and imports were up by 1.96
percent. Meanwhile, investment expanded by 1.36 percent.

On the other hand, weak investment and export performances had
prevented the economy from returning to its pre-crisis growth
rate of 6-7 percent, which would create jobs for the millions of
unemployed.

Calculations show that each 1 percentage point of growth could
reduce unemployment by 400,000. Based on this assumption, some
1.64 million workers should have been absorbed in 2003 -- far
below the 2.5 million workers estimated to enter the job market
annually.

There are currently 40 million Indonesians reportedly living
below the poverty line.

The BPS also reported that in the fourth quarter of 2003, GDP
was down 2.78 percent from the previous quarter, hurt by numerous
public holidays, although it rose by 4.35 percent year-on-year.

The government expects a 4.8 percent growth in 2004, betting
on the continued rise in exports and a more robust consumption --
fueled by generous spending by political parties during the
national elections -- to offset investment, which is predicted to
remain in the doldrums, at least until after the elections.

The central bank has predicted private consumption this year
would grow by between 4.2 percent to 5 percent, while exports
would improve at 2.5 to 3.5 percent, assuming the country is able
to take advantage of the continuing global economic recovery.