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.