Citibank predicts GDP to grow by 4.8%

P.C. Naommy, The Jakarta Post, Jakarta

Citibank predicts the country's economy to grow by around 4.8 percent this year in line with the government's projection.

The bank's economist in Indonesia Anton Gunawan said that domestic consumption would continue to become the main driver of the economy, contributing around 70 percent to gross domestic product.

Speaking at a seminar on the economy, Anton said that household consumption would grow by 5.4 percent in 2004 from last year's 4.7 percent.

He explained that the favorable macroeconomic climate particularly the current declining trend in domestic interest rate would help push consumer spending even higher.

Citibank predicts the Bank Indonesia benchmark interest rate to continue to decline this year.

Anton added that the consumption growth would also be supported by increasing trend of real wages in the manufacturing and agriculture sectors, thanks to a relatively benign inflation level.

But Anton said that investment would likely slowdown this year among others due to the general elections.

According to data from the Investment Coordinating Board (BKPM), approved domestic investment increased by 92.17 percent from Rp 25.2 trillion in 2002 to Rp 48.5 trillion in 2003. Approved foreign direct investment (FDI) has remained marginal with an increase of only 34.83 percent from US$9,795.4 million in 2002 to $13.207 million in 2003. Some analysts have said that the increase in the FDI figure was largely attributed to a switch in existing domestic investment into foreign investment schemes following acquisition moves.

Analysts have said that attracting more investments and boosting exports are crucial for the country to be able to enjoy a higher economic growth of between 6-7 percent, needed to create enough jobs for the millions of unemployed people.