Analysts say 6% growth target is unrealistic

Analysts say 6% growth target is unrealistic

Dadan Wijaksana
The Jakarta Post
Jakarta

Analysts agreed with the government that the country's economic
growth could improve next year, but that it could only happen
gradually, and therefore 6 percent growth in 2003 would be very
unlikely.

Minister of Finance Boediono told legislators on Tuesday when
presenting the 2003 state budget draft that the country's
economic growth could return to the pre-crisis level of 6 percent
next year on the back of improving political conditions at home
and rapid progress in the country's bank restructuring program.

He said that the recovery in the global economy would also
support a projected 4 percent to 6 percent growth next year.

However, economists' projection was more conservative, saying
that the country's growth would fall on the pessimistic side of
the range, which is around 4 percent.

"The growth assumptions presented by the government make
sense, meaning the range is so wide that it (growth) cannot be
outside that range," Citibank economist Anton Gunawan told The
Jakarta Post on Wednesday.

Similarly, Raden Pardede of Danareksa Research Institute also
said: "When we're looking at the 'four' side of the assumption,
and not the six, I think the growth range is realistic."

Experts have said that in order for the government to absorb
the huge numbers of unemployed created by the 1998 economic
crisis, the country must have an economic growth rate of more
than 6 percent.

This year, the economy is estimated to grow by 4 percent on
the back of strong consumer spending.

Other government economic targets for the 2003 state budget
are: an exchange rate of between Rp 8,500 and 9,500 to the U.S.
dollar, an inflation rate of between 7 percent and 9 percent,
interest rates on the central bank's three-month SBI promissory
notes of between 12.5 percent and 14.5 percent, and oil prices of
$19 to $22 per barrel.

The government argued a better business climate at home and
recovery of the global economy, particularly the U.S., Japan and
the European Union, would push the country's performance in
investment and exports, respectively.

An increase in investment and exports would eventually lead to
higher economic growth, the government claimed.

A better business climate can be achieved by maintaining a
relatively stable political climate, the absence of security-
related problems and a quick recovery of the banking sector's
intermediary role.

A speedy recovery in the U.S., Japan and the EU would prove
beneficial as the three have always been the country's main
export destinations.

However, both Anton and Raden were doubtful that there would
be a significant increase in investment and exports.

"Investment needs a conducive environment. Are we sure this is
going to happen next year when political tension will be heating
up ahead of the 2004 election?" Raden asked.

He added that politics is very hard to predict: "Yes, it is
improving, but who knows what will happen next year."

Anton concurred, saying he was more concerned about the
performance of the banking sector, which he regards as the main
factor to support business activities.

As for exports, although the two agreed the world's economy is
moving toward recovery, it would not be easy to prop up the
country's export performance amid tight competition with other
Asian export-oriented countries.

"Although there'll be more import demands (from the three
countries), Indonesia still has to compete with many countries in
the region, especially now that China has entered the
competition," Raden said.