Economy grew by 2.47% in first quarter

Dadan Wijaksana, The Jakarta Post, Jakarta

The economy grew by 2.47 percent in the first three months of 2002 compared to the same period last year, fueled mainly by strong consumer spending, the Central Bureau of Statistics (BPS) reported on Wednesday.

Although the growth rate is lower than what most analysts had predicted -- including Bank Indonesia, which foresaw a 3.2 percent growth -- optimism still remains that the government's full-year target of 4 percent growth in gross domestic product (GDP) can be achieved.

Bank Indonesia deputy governor Miranda Goeltom said the economy would pick up faster in the coming quarter, still on the back of strong consumer spending.

"I think we'll grow faster in the second quarter and the target of 3.5 percent to 4 percent growth is expected to be met," Miranda said, referring to the central bank's full-year growth forecast.

Standard Chartered Bank economist Fauzi Ichsan said that although most analysts had been overly bullish on the first quarter GDP figure, the actual growth figure was not bad.

"I think the overall picture is still good," he said, adding that the government should be on track to meet its growth target for the year as long as it could maintain political stability and the pace of the economic reform program.

BPS also expressed optimism that this year's economic growth would be better than last year's 3.2 percent.

"If the situation remains conducive, economic growth this year could fare better than last year," said BPS deputy chief La Ode Syafiuddin in a news conference.

BPS said that the GDP grew by 2.15 percent in the first quarter from the fourth quarter of last year.

Indonesia's economic growth still hinges on consumer spending as the current slump in the world's economy has been dragging down the country's exports, while foreign direct investment would remain low as the country has yet to address various problems at home, including legal uncertainty, labor unrest and a security problem.

Foreign direct investment approval was down 90 percent to US$292 million in the first quarter of this year compared to $2.44 billion in the same period last year, according to a report from the Investment Coordinating Board (BKPM).

Reports of an improvement in investor confidence in the country during the first quarter, analysts said, was mostly dominated by portfolio investment as shown in the rising stock market index and 10 percent rise in the value of the rupiah to the U.S. dollar, considered to be one of the best performing markets in the region.

Although the economy could grow by 4 percent this year, the government is still facing an uphill task as the growth figure is not sufficient to absorb the millions of unemployed people.

Experts have said that the country needs to have growth of between 6 percent and 7 percent to be able to absorb the huge unemployment.