Bombing impact on GDP likely to be limited: Govt, IMF

Bombing impact on GDP likely to be limited: Govt, IMF

The Jakarta Post, Jakarta

The government has said that the latest bombings in Bali would
not significantly hold back this year's economic growth,
particularly as a steep downturn in the resort island's tourism
sector has yet to be seen.

Coordinating Minister for the Economy Aburizal Bakrie said on
Monday the government had immediately worked out two scenarios of
how the incident could affect the country's gross domestic
product (GDP) projection for the year.

In the first scenario, Indonesia's GDP is estimated to drop by
between 0.25 and 0.3 percent, if the bombings result in a 25
percent decrease in tourist arrivals in Bali and other tourist
destinations throughout the country until the year end.

Meanwhile, in the worst-case scenario, Indonesia's economy
could contract by up to 0.5 percent or 0.6 percent, if the number
of visitors drops by 50 percent.

"But we have not seen an exodus of tourists from Bali, so I
think the impact will not be too great," he said after a meeting
with the Consultative Group on Indonesia (CGI).

"I don't even think the first scenario will happen, and its
impact would be far less than 2002."

Three bombs rocked Bali's two main tourist sites of Jimbaran
and Kuta on Saturday night, killing at least 22 people and
injuring more than 100 others, bringing back memories of a
similar tragedy in Kuta beach area three years ago, which killed
at least 202 people, mostly foreign tourists, and plunged the
resort island's tourism sector into the doldrums.

State Minister for National Development Planning Sri Mulyani
Indrawati had said the bombings could undermine the government's
target of reaching a 6.0 percent GDP growth this year, fearing
its impact on investor confidence and Bali's tourism sector.

Data from the Central Statistics Agency (BPS) shows tourism
contributes to some 6 percent of Indonesia's gross domestic
product (GDP) and employs up to 8 percent of the total workforce.
The government expects to reap US$6 billion from 6 million
foreign tourist arrivals this year, up from $4.8 billion it
managed to generate from 4.5 million overseas visitors last year.

BPS reported that the number of foreign tourists as of August
had reached 2.85 million, down 5.39 percent from the same period
last year.

Meanwhile, on the country's investment prospectus following
the bombings, Aburizal said, it too would not be significantly
affected.

"No major infrastructure facilities or tourist sites have been
severely damaged, so Bali would still be attractive for
investment," he said, although acknowledging that it would surely
shake the confidence of investors for the time being.

For this, the government has held discussions with the CGI to
use some of its pledges for improving Indonesia's security
system, he said, without elaborating further.

Also on a positive note, the International Monetary Fund (IMF)
said on a separate occasion that the impact of the bombings,
while it was too early to assess the total damage, was likely to
be limited.

"I don't think that (the impact) will be large," David Burton,
IMF director for the Asia-Pacific region, told a seminar in Tokyo
as reported by Dow Jones.

At the local stock and currency markets, the impact of the
bombings was negligible as well, overshadowed by the markets'
positive perception of the government's fuel price hike decision.