BPS reports higher economic growth

BPS reports higher economic growth

The Jakarta Post, Jakarta

The economy grew at a higher rate in the second quarter of this
year compared to the same period last year, driven by stronger
domestic consumption, the Central Statistics Agency (BPS)
reported on Friday.

This stronger growth raises hopes that the government's
economic growth target of 4 percent for the year can be achieved,
it said.

The BPS said the economy, as measured by gross domestic
product, expanded by 3.76 percent in the second quarter from the
same period last year. This is faster than the first quarter
year-on-year growth rate of 3.43 percent.

The agency said household consumption and government
consumption increased by 4.68 percent and 9.22 percent,
respectively.

BPS chief Sudarti Surbakti said was optimistic the economy
would grow at a faster pace in the second half of the year.

"Don't forget there will be some big public holidays and
festivities in the fourth quarter of the year, which will boost
household consumption," she told reporters.

Some economists had said that growth in the second quarter
would likely slow amid signs of declining domestic consumption,
as people's purchasing power weakened due to high unemployment
and the rising prices of utilities.

This, combined with the recent Severe Acute Respiratory
Syndrome outbreak, prompted economists to slash this year's
growth forecast to about 3.5 percent. The recent terrorist
bombing at a Jakarta hotel only aggravated the situation.

But government officials have remained confident that this
year's economic growth target can be met. They have said that
domestic consumption will remain high on the back of improving
macroeconomic conditions and a recovery in the export sector.

The rupiah has been appreciating rapidly since the beginning
of this year, which has been the main factor driving inflation to
a 20-year low during the first half of 2003. This has in turn
provided room for the central bank to continue cutting its
benchmark interest rate to single-digit levels at about 9
percent, compared to more than 13 percent at the beginning of
this year.

Elsewhere, BPS said capital formation and exports increased
respectively by 4.87 percent and 0.16 percent during the second
quarter.

The agency said almost all sectors in the economy enjoyed
higher growth in the period. The agricultural sector grew by 1.60
percent, the mining sector by 4.42 percent, manufacturing sector
2.78 percent, the electricity, gas and water sector 7.49 percent,
construction 5.23 percent, trade, hotel and restaurant 4.61
percent, transportation and communications 7.34 percent, finance
5.78 percent, and the services sector 2.19 percent.

The Indonesian economy has been growing at a modest rate of 3
percent to 4 percent over the past couple of years. But
economists have said that in order to create enough jobs for the
millions of people who lost their jobs following the late 1990s
economic crisis, the economy has to grow at between 6 percent and
7 percent per year.

The government is targeting the economy to grow by 5 percent
next year, and 6 percent starting in 2006 or 2007.

Box

Growth of GDP components

Components Growth rate (%)

Q2/Q1 2003* Q2 03/Q2 02 **

Household consumption 1.79 4.68
Govt consumption 7.24 9.22
Fixed capital formation 0.49 4.87
Exports 1.46 0.16
Imports -5.76 -2.19

* Second quarter of 2003 compared to first quarter of 2003

** Second quarter of 2003 compared to second quarter of 2002