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