BI upbeat on 2004 growth despite election
BI upbeat on 2004 growth despite election
The Jakarta Post, Jakarta
Bank Indonesia Governor Burhanuddin Abdullah expressed optimism
that the economy could grow higher at around 4.8 percent in 2004
despite the election year.
Burhanuddin is also convinced that the election process would
go smoothly because there are no clearly dominant political
parties in the election, a situation that will force parties to
form coalitions and lessen friction between themselves.
"If there is no friction, then the election will be orderly
and safe. There may be some small internal party friction, but
that can be controlled by the party itself. So the 2004 general
election will be peaceful and calm," he told reporters on Monday
at a post-Idul Fitri press conference.
He also said that the election period would provide a further
boost to domestic consumption because of stronger consumer
spending particularly during the campaigning period.
Domestic consumption has been the country's main engine of
growth during the past four years amid weak investment and export
performance.
The government in the 2004 state budget has targeted the
economy to grow by 4.8 percent, from the estimated 4 percent for
this year, particularly if strong domestic consumption continues.
But some analysts have previously warned that domestic
consumption could likely slow down next year as the people's
purchasing power had started to weaken due in large part to the
rising number of unemployed people as companies continued to put
investment on hold in some case, and others have moved away to
other countries, which have a better investment climate.
There is also concern that the 2004 general election, a seven-
month process, will make companies shy away from further
investment and other spending. It will be the country's first
direct presidential election, which some fear could turn chaotic.
Burhanuddin acknowledged that there had been rising questions
on the sustainability of domestic consumption to maintain
economic growth.
He said that the central bank will conduct more research on
the economy's prospects as it relates to decentralization.
"We'll ask (our staff) to do more research to determine
whether there has been a positive impact from the regional
autonomy and fiscal decentralization on the people's finances,
which determine their consumption level," he said.
He said that sustainable economic growth should not rely
solely on consumption, but must also be supported by a healthy
investment performance, which can create jobs.
Analysts have said that the country's economy ideally needs to
grow at a minimum of pre-crisis levels of between 6 percent and 7
percent in order to create enough jobs for the tens of millions
of unemployed people.
On inflation, Burhanuddin said that the consumer price index
would be in the range of 6 percent and 7 percent next year.
He said that despite the relatively low inflation, there would
not be much room for the central bank to continue to lower its
benchmark interest rate amid a recovery in the economies of the
U.S., Europe and Japan. Their economic growth will put the
brakes on the downward trend in global interest rates.