Economists play down market woes

Local economists said there was no reason to be overly worried with the current slump on Wall Street, saying the drop was likely to be temporary and would not have a serious impact on the U.S. economy and global recovery.

Standard Chartered Bank economist Fauzi Ichsan told The Jakarta Post that it was too early to tell if the recent developments would slow down the recovery in the global economy.

"The situation is not as bad as people might have said. This is bad, but it has yet to affect the U.S. real sector. In fact, its fundamentals are showing improvement," Fauzi said on Thursday.

"If it starts to hamper the U.S. domestic consumption, then we're in trouble. I just do not see that happening."

A sharp drop in Wall Street stocks, prompted by a string of accounting scandals, had deteriorated market confidence world- wide, sending most equity markets in Europe and Asia stumbling.

Worse still, concerns are rife that this might put the U.S. economy -- which has started to recover -- in jeopardy which will eventually impede the already fragile global economic recovery.

This would put heavier pressure to the exports-oriented countries like Indonesia as a decline in demand would then be inevitable. The U.S. is currently the main export destination for Indonesia.

Citibank economist Anton Gunawan also believed that such worries were exaggerated.

"Even if it is to materialize, that could only occur in the long run. Of course this would have impacts on the U.S. economy but not yet to a level where it could affect its fundamentals," Anton told the Post.

"Up to now, the U.S. fundamentals are still progressing, consumer confidence remains strong, and there are also good signs in unemployment rates," he said.

Anton even suggested that countries outside the U.S. should take advantage of possible capital outflows resulting from the U.S. investors seeking other places to invest.

Nevertheless, both economists agreed that the country should apply a cautious approach should the current slump continue for a long period. -- JP