Consumption, exports could spur economic growth: Central Bank
Consumption, exports could spur economic growth: Central Bank
Dadan Wijaksana, The Jakarta Post, Jakarta
The central bank said on Thursday the economy could grow this
year by 5 percent, slightly higher than the state budget's
projection of 4.8 percent, on the back of an increase in private
consumption and exports.
Private consumption, which makes up some 70 percent of the
country's gross domestic product (GDP), is expected to grow by as
much as 5 percent, Bank Indonesia governor Burhanuddin Abdullah
said during the bank's presentation on the country's economic
outlook for 2004.
"Exports will increase as well this year, by between 2.5
percent and 3.5 percent (over last year)," Burhanuddin said,
adding it was based on the assumption that the country could take
advantage of the continued signs of global economic recovery.
As for 2003, the central bank predicted the economy had
expanded by 4 percent, before all the data has been thoroughly
calculated.
The optimistic outlook for this year was consistent with
rising confidence on the economy from analysts, which predicted
the economy would fare better this year, thanks in part to a more
robust consumption generated from the general elections -- as
parties are set to dole out trillions of rupiah as part of their
strategy get the 143 million registered voters to vote for them.
Besides, Burhanuddin said consumer demand would also be
spurred by the declining trend in the central bank's benchmark
interest rate, which currently stands at an historic low of 8.24
percent, backed by a benign inflation and rupiah that has
remained a the same level against the extremely weak U.S. dollar.
The trend should lead to cheaper borrowing costs which would
eventually boost consumer spending. Burhanuddin reiterated the
bank's commitment to maintaining the trend, saying: "The SBI rate
was likely to fall further to around 8 percent in the first
quarter of the year."
He added that the move was also important to help boost
productive activities. But, also of equal importance, it would
ease the burden of the government in servicing the interest
payment of its domestic bonds, most of their interest rates are
tied to the central bank's rate.
Analysts however, say the projected economic growth next year
would still be insufficient to resolve the country's unemployment
woes.
They say Indonesia's economy needs to expand by about 6
percent to 7 percent annually to cut unemployment in the country.
With only 4 percent growth, about 1.2 million new workers each
year will fail to find work, on top of the 40 million or so
currently without full-time employment.
Elsewhere, Burhanuddin also forecast the rupiah to stay within
a range of 8,200-8,700 per U.S. dollar this year, and a 5-6
percent range for inflation. The state budget targets the rupiah
to average 8,600 against the U.S. dollar, and an inflation of 6.5
percent.
eyebox
RI GDP Growth Predictions (%)
--------------------------------------
2003 2004
--------------------------------------
State Budget 4.0 4.8
Bank Indonesia 4.0 5.0
ADB 3.4 4.0
StanChart 3.8 4.3
Bank Mandiri 3.9 4.2
--------------------------------------
Source: The Jakarta Post
Dadan Wijaksana, The Jakarta Post, Jakarta
The central bank said on Thursday the economy could grow this
year by 5 percent, slightly higher than the state budget's
projection of 4.8 percent, on the back of an increase in private
consumption and exports.
Private consumption, which makes up some 70 percent of the
country's gross domestic product (GDP), is expected to grow by as
much as 5 percent, Bank Indonesia governor Burhanuddin Abdullah
said during the bank's presentation on the country's economic
outlook for 2004.
"Exports will increase as well this year, by between 2.5
percent and 3.5 percent (over last year)," Burhanuddin said,
adding it was based on the assumption that the country could take
advantage of the continued signs of global economic recovery.
As for 2003, the central bank predicted the economy had
expanded by 4 percent, before all the data has been thoroughly
calculated.
The optimistic outlook for this year was consistent with
rising confidence on the economy from analysts, which predicted
the economy would fare better this year, thanks in part to a more
robust consumption generated from the general elections -- as
parties are set to dole out trillions of rupiah as part of their
strategy get the 143 million registered voters to vote for them.
Besides, Burhanuddin said consumer demand would also be
spurred by the declining trend in the central bank's benchmark
interest rate, which currently stands at an historic low of 8.24
percent, backed by a benign inflation and rupiah that has
remained a the same level against the extremely weak U.S. dollar.
The trend should lead to cheaper borrowing costs which would
eventually boost consumer spending. Burhanuddin reiterated the
bank's commitment to maintaining the trend, saying: "The SBI rate
was likely to fall further to around 8 percent in the first
quarter of the year."
He added that the move was also important to help boost
productive activities. But, also of equal importance, it would
ease the burden of the government in servicing the interest
payment of its domestic bonds, most of their interest rates are
tied to the central bank's rate.
Analysts however, say the projected economic growth next year
would still be insufficient to resolve the country's unemployment
woes.
They say Indonesia's economy needs to expand by about 6
percent to 7 percent annually to cut unemployment in the country.
With only 4 percent growth, about 1.2 million new workers each
year will fail to find work, on top of the 40 million or so
currently without full-time employment.
Elsewhere, Burhanuddin also forecast the rupiah to stay within
a range of 8,200-8,700 per U.S. dollar this year, and a 5-6
percent range for inflation. The state budget targets the rupiah
to average 8,600 against the U.S. dollar, and an inflation of 6.5
percent.
eyebox
RI GDP Growth Predictions (%)
--------------------------------------
2003 2004
--------------------------------------
State Budget 4.0 4.8
Bank Indonesia 4.0 5.0
ADB 3.4 4.0
StanChart 3.8 4.3
Bank Mandiri 3.9 4.2
--------------------------------------
Source: The Jakarta Post