ADB predicts RI economy to grow 3.4% this year
ADB predicts RI economy to grow 3.4% this year
Zakki Hakim, The Jakarta Post, Jakarta
Indonesia's economy is expected to grow a modest 3.4 percent this
year and 4 percent in 2004, driven largely by private
consumption, the Asian Development Bank (ADB) said in a report
released on Monday.
The ADB said that the moderate economic growth in the next two
years would also be supported by an improving investment climate
and the external environment.
The bank's growth projection is lower than the government's 4
percent target, but still higher than the World Bank's 3.3
percent target. Last year the economy grew by 3.7 percent.
Slower economic growth this year means that the country's
unemployment problem will further deteriorate. Analysts have said
that to help resolve the unemployment problem, the economy has to
grow by between 5 percent and 6 percent.
ADB said that Indonesia's political stability, sound
macroeconomic policies and progress of structural reforms
strengthened the currency and stock markets, while interest rates
and inflation declined.
It said that in 2003 and 2004, financial sector reforms would
strengthen the banking system, supporting an increase in gross
domestic product.
The bank said inflation is expected to be moderate at 10
percent in 2003 and 8.5 percent in 2004 from 11.9 percent in
2002, as a result of a tight monetary policy.
The ADB report said the state budget deficit was expected to
fall to zero by 2004 as a result of continuing fiscal discipline.
In the face of international competition, export growth will
be modest, but will maintain the upward trend that begun in 2002
despite strong competition from China and Vietnam.
It said investment spending is expected to start improving,
largely for cyclical reasons. A stronger legal and judicial
system, lower business costs and improved certainty in the policy
environment, especially at the local level, will be needed to
sustain higher investment in the long run.
The report also noted that stronger security measures have
increased confidence but warns that the regional spread of Severe
Acute Respiratory Syndrome (SARS) could have an adverse impact on
tourism receipts in the first half of 2003.
Regionally, the SARS epidemic is likely to depress economic
growth in developing Asia by 0.1 percent to 0.2 percent in 2003,
but the 41 economies that make up the region will still be the
world's economic bright spot with aggregate GDP growth of 5.3
percent, the report said.
It said the economic impact of SARS was currently confined to
East Asia and Southeast Asia.
Asia is expected to outperform the rest of the world economy
including the U.S., Japan and Europe, the report said.
The bank said, the region's growth momentum was expected to
carry into 2004, when a stronger world economy was predicted,
with the ADB report projecting higher aggregate GDP growth of 5.9
percent for developing Asia.
The main driving forces behind the robust outlook for Asia and
the Pacific are an expected strong domestic demand, improving
export performance, a supportive policy environment and prudent
fiscal and monetary policies.