4% growth unlikely given war, SARS: Government
The Jakarta Post, Jakarta
The ongoing war in Iraq, coupled with the spread of Severe Acute Respiratory Syndrome (SARS), would deal a blow to the economy making it very unlikely that it would expand by 4 percent this year as initially targeted, a senior government official said.
"The 4 percent growth target will be hard to achieve given international developments," Jannes Hutagalung, a deputy in the Office of the Coordinating Minister for the Economy, told reporters on Thursday.
Under this year's state budget, the economy is targeted to expand by 4 percent.
However, the Iraq war would further slow down the global economy which would in turn hurt the country's exports and investment performance, Jannes said.
As for SARS, he went on, it would provide another blow to the country's tourism sector, which was still feeling the pinch from last year's terrorist attacks on the resort island of Bali.
Taking together, there was now an unfavorable climate for the economy to expand.
"The longer the war, the bigger the burden our economy will have to shoulder, while the spread of SARS will further hit our tourism industry," Jannes said.
He did not elaborate on how much the economic growth estimate would be cut as a result of the negative external developments. But, his remarks came as analysts in general were busy revising downward their growth projections.
On Wednesday, investment bank Morgan Stanley revised downward its growth estimate for Asia from 5.1 percent to 4.5 percent, which was based on the most optimistic scenario. Specifically for Indonesia, the bank estimated that SARS and the Iraq war would trim the country's economic growth by 0.2 percent.
This would further hamper the government's efforts to speed up economic growth so as to absorb huge numbers of unemployed in the country.
Indonesia's economy has been growing steadily at between 3 percent and 4 percent over the past couple of years, an expansion deemed insufficient to absorb around 2.5 million new workers each year.
In order to do that, analysts have said the economy would need to expand by between 6 percent and 7 percent every year, something that is difficult to achieve giving collapsing investment and unimpressive export figures.
Even before the war and the emergence of SARS, investment here was hard to come by due to unfavorable climate in Indonesia, while the slowdown in world economy continued to limit the global demand for exports.
Last year, the economy managed to grow by 3.6 percent, thanks largely to continued robust consumer spending.
Elsewhere, to minimize the impact on the economy, the government has pledged to boost exports and investment in order to try to attain the 4 percent growth target.
As regards exports, destinations need to be diversified so that the country becomes less dependent on its traditional destination countries, such as the U.S., Japan and Singapore, whose economies have all been affected by the downturn in the global economy.