ADB revises upward RI's 2002 GDP growth estimate

ADB revises upward RI's 2002 GDP growth estimate

A'an Suryana, The Jakarta Post, Jakarta

The Asian Development Bank (ADB) has revised upward its 2002
economic growth prediction for Indonesia from an earlier 3
percent to 3.2 percent.

The higher prediction was based on an expected recovery in
exports, particularly on the back of higher oil prices.

The ADB said that consumption demand would be sustained,
although at a lower rate than in 2001, and the agricultural
sector would also perform well during the rest of this year.

The bank said in the "Asian Development Outlook 2002 Update"
report that gross domestic product (GDP) growth for 2003 was
projected at 4.4 percent.

ADB did not give its prediction for the oil price, but the
optimistic projection seems possible amid the growing tension in
the Middle East.

Due to fears of a U.S.-led attack on Iraq, oil hit US$30 a
barrel for the first time in 18 months in August.

The higher oil price would benefit oil exporting countries
like Indonesia.

With the increasing price of oil, Indonesian exports from the
oil sector could increase as well, which could ease pressure on
the state budget.

The government has targeted the economy to grow by 4 percent
this year, and by about 5 percent next year. This year's growth
is expected to be mainly driven by strong domestic consumption,
while a stronger export performance next year is expected to help
push economic growth higher.

The higher economic growth is crucial to help absorb the huge
unemployment in the country, which according to one estimate has
reached around 40 million out of the total labor force of around
100 million people.

But independent economists have warned that the 5 percent
growth projection was rather too optimistic given fragile
economic conditions in the U.S. and Japan, Indonesia's major
export markets.

A host of problems at home, such as security concerns, legal
uncertainty and lingering labor conflicts are discouraging
investors from making new investments here. During the first
half of this year, for example, foreign direct investment (FDI)
approval declined by around 42 percent compared to the same
period last year. Domestic investment approvals had also
plunged.

Minister of Industry and Trade Rini MS Soewandi said
previously that higher prices for agricultural commodities were
expected to improve the country's export performance.

A report in this paper last week said that the price of cacao
hit a 13-year high of about Rp 17,000 per kilogram amid fears of
lower output from the world's largest producer, the Ivory Coast,
and rising global demand.

Indonesia is currently the world's third largest producer of
cacao with an output this year expected to reach 400,000 tons.

The price of crude palm oil (CPO) has also beein on a rising
trend. Indonesia along with Malaysia are among of the world's
top CPO exporters.