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.