BI expects GDP to grow by 4.2-4.7% in Q1

BI expects GDP to grow by 4.2-4.7% in Q1

Dadan Wijaksana, The Jakarta Post, Jakarta

Rapid growth in consumer loans is expected to help a
consumption-driven economy expand in the first quarter by as much
as 4.7 percent, according to the central bank's latest economic
assessment.

Bank Indonesia said the level of consumer borrowing should
keep robust domestic consumption steaming ahead as the largest
contributor to the country's gross domestic product.

"The economy in the first quarter is forecast to grow in a
moderate range of between 4.2 percent and 4.7 percent --
primarily driven by consumption, although investment and exports
would also rise slightly," the central bank said in a statement
issued on Wednesday after the latest monthly meeting of its board
of governors.

By comparison, the government is targeting the full-year
economy to grow by 4.8 percent in 2004, compared to 4.1 percent
in 2003.

The strong consumption, the statement added, was attributable
to rising consumer loans from banks and higher household
purchasing power amid easing inflation.

Domestic consumption accounts for about 80 percent of the
country's GDP.

The central bank did not provide a precise figure on the level
of consumer borrowing, but various surveys have confirmed that
this has been rising rapidly, with one estimate saying that
growth has averaged some 40 percent over the past five years.

In 2003, consumer loans from the banking sector stood at Rp
98.3 trillion, a jump of more than 300 percent over the Rp 24
trillion booked in 1999.

Calculations by the Institute for the Development of Economics
and Finance (Indef) show that the ratio of consumer borrowing to
household consumption stands at around 30 percent.