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.