Analysts cut GDP growth predictions after Bali terror
The Jakarta Post, Jakarta
Economists revised downward this year's economic growth target for Indonesia, predicting the Bali bomb blasts would squash tourism revenue and investment spending for the remainder of this year.
University of Indonesia economist Chatib Basri and economists quoted by AFP had estimated a growth of below the government targeted 4 percent even before the Bali terrorist strike.
"Our base growth prediction was 3.8 percent before the attack, now we've cut it to about 3.6 percent," Chatib of the University of Indonesia's Institute for Economic and Social Research said.
The tourism sector contributes about US$5 billion in foreign exchange earnings, making it the largest non-oil and gas dollar earner after the textile and garment industry.
Bali accounts for about one-third of all tourism earnings, but now faces empty beaches and hotels in its November-December peak season after more than 180 people, mainly foreign vacationers, died in the weekend bomb blasts.
"I'd say the incident will chip off about 0.15 percentage points from this year's GDP," Chatib said, referring to Indonesia's gross domestic product, which measures the value of services and goods produced in a year.
The Bali attack is also adding pressure to the rupiah and deterring investors with security fears and higher risk premiums for Indonesian assets.
A sluggish rupiah driving up inflation would weaken domestic consumption, which at about 70 percent of GDP is the backbone of Indonesia's economy, said Chatib.
Bank Indonesia intervention has helped reverse some of the rupiah's losses from Monday, bringing the local unit up to 9,200 against the US dollar from 9,285 on Tuesday.
Analysts said Indonesia must secure an economic growth of at least 5 percent to 6 percent to be able to cut unemployment and poverty.
They have urged the government to come down hard on suspected terrorists to help restore investor confidence and prevent the impact of the Bali bombings from spilling over to next year.
An economist at state-run Bahana Securities, Budi Hikmat, has revised downward his 2002 GDP growth forecast to 3.1 percent from 3.8 percent, on the assumption that private consumption in the fourth quarter will be dampened.
GK Goh Stockbrokers economist Song Seng Wun said he was downgrading his 2002 GDP growth forecast to between 3.1 percent and 3.2 percent from 3.4 percent, and his 2003 forecast to 3.0 percent from 4.0 percent.
Meanwhile, Lehman Brothers said it had tentatively revised downward its GDP growth forecast to 3.3 percent in 2002 and 4.0 percent in 2003, from 3.5 percent and 4.5 percent respectively.
It said the need to confront domestic terrorism represented President Megawati Soekarnoputri's greatest challenge since taking office last year.
"The need to confront domestic terrorism will further stretch the Indonesian government's limited resources at a time when it is already struggling with the mountain of reform challenges stemming from the Asian crisis," it said in its latest report.
"Although we do not expect the fallout from the weekend terrorist attack in Bali to completely derail Indonesia's fledgling recovery, it is likely to dent growth, both this year and next."
Economists said they did not expect any major changes to the government's monetary policies, with the rupiah's fall following the blast to be limited by central bank intervention.