Bappenas predicts economy to grow by 4.5% next year

Bappenas predicts economy to grow by 4.5% next year

Dadan Wijaksana, The Jakarta Post, Jakarta

The National Development Planning Agency (Bappenas) sees the
economy growing by 4.5 percent next year, absorbing possibly some
1.4 million new entrants to the workforce, assuming no political
turmoil during the general elections.

In a written statement on economic prospects for 2004, the
agency said it was betting on an increase in all components of
growth -- exports, consumption and investment -- to drive the
economy faster than this year's estimated 4 percent.

Bappenas director for macroeconomic planning Bambang
Prijambodo told a seminar here on Monday that the growth would
still be led by consumption (both government and household),
which was expected to grow by 5.1 percent.

"The estimated improvement in the global economy would likely
push investment and the growth of exports of goods and services
by 3.8 percent and 3.7 percent respectively," Bambang said.

He added that, as a result of rising investment, which he said
would come in the second half of the year, the country would also
post a rise in demand for services and imported goods of about
6.2 percent.

According to the Central Statistics Agency (BPS), consumption
-- both private and government -- remains the largest contributor
to third-quarter economic growth -- close to 80 percent of the
economy, with net exports and investment making up the remainder.

The increase in consumption was predicted to come on the back
of higher spending largely for political campaigns given upcoming
elections, defying the current trend of consumption, which had
experienced a slowing down lately in its rate of growth.

Bappenas, a state institution in charge of economic
development planning, produces each year a similar statement that
sets out its assessment of and the prospects for the country's
economy.

The Bappenas prediction is slightly lower than the 4.8 percent
economic growth assumed under the 2004 state budget.

What is worrying, however, is that Bambang acknowledged that
with 4.5 percent growth, the economy would be able to absorb only
about 1.4 million new workers, leaving 700,000 others without
employment.

With more than 2 million new job seekers each year,
Indonesia's economy needs to expand by at least 6 percent per
annum to absorb most of them, experts have said. The economy has
been growing by 3 percent to 4 percent during the last few years,
compared with precrisis growth levels of 6 percent to 7 percent.

However, Bambang also warned of a setback to economic growth
if the country failed to minimize the negative impact of the
general elections, especially if it led to political and security
instability. In that event, the growth rate could be reduced to 3
percent. Other targets would also be affected, he added, with the
rupiah exchange rate falling to as low as Rp 10,000 per dollar,
and inflation at 10 percent.

Under the first scenario, with economic growth at 4.5 percent,
the rupiah would likely stabilize at around 8,600 per dollar and
inflation average around 6.5 percent.