Consumers give thumbs down to economic prospect

The Jakarta Post, Jakarta

Consumer confidence in Indonesia, the main engine that fueled economic growth by an impressive 2.38 percent in the third quarter, fell dramatically last month, which could spell trouble for Indonesia if this translates into consumer spending.

A monthly survey by Danareksa Research Institute found that all indices related to consumer spending plunged in October, bringing an end to two months of upward trends dating back to the inauguration of Megawati Soekarnoputri as Indonesia's fifth president.

"The weakening rupiah, which broke through the 10,000 level against the dollar, shook consumer confidence," the agency said in its latest report, to be published on Monday.

Hope for an economic recovery, encouraged by the change in national leadership in July, appeared to have lost its momentum in the absence of any fundamental change in the economy, it said, adding that the honeymoon period of Megawati's government had now ended.

The government's failure to promptly deal with domestic political and economic consequences of the September 11 terrorist attacks in the United States affected confidence, the report indicated.

The consumer confidence index fell to 107.7 in October from 116.8 points in September.

The tone of the survey remained positive given that an index above 100 still means that optimism outweighs pessimism.

The biggest plunge was recorded in the Consumer Confidence in the Government Index, which fell to 134.0 from 152.2.

Danareksa attributed the decline to a "lack of leadership" by the government in overcoming social and economic problems.

"This was compounded by growing doubts about the ability of the government's economic team in stimulating growth and eventually creating employment opportunities," it said.

Criticism has mounted against Megawati's economic ministers to the point that chief economics minister Dorodjatun Kuntjoro-Jakti and his colleagues are no longer considered a "dream team", which is the way they were greeted when selected in August.

The survey on consumer confidence interviewed 1,700 households in five regions regarding their spending patterns.

The Central Bureau of Statistics said last week that real gross domestic product grew by 2.38 percent in the third quarter, driven largely by strong consumer spending. This was an impressive achievement given the domestic political situation and the global economic slowdown.

While the government statisticians appeared hopeful that the 3.5 percent economic growth target for 2001 could be achieved, doubts have crept in among forecasters about prospects for 2002.

The Danareksa Research Institute survey, conducted by AC Nielsen, said "excessive" domestic reactions to events in Afghanistan, including the anti-America demonstrations, have raised fears of inflation and economic instability.

These were reflected in the Present Situation and Expectation indices. (Full results of the survey are available at Danareksa Research Institute's website: http://www.dri.co.id).