Economy grows faster than expected in 2004

Fabiola Desy Unidjaja, The Jakarta Post, Jakarta

Indonesia's economy grew faster than projected last year, thanks to continued robust spending and signs of investment revival, Coordinating Minister for the Economy Aburizal Bakrie said on Tuesday.

The economy could grew by as much as 5.1 percent in 2004, the fastest pace since the 1997-1998 crisis, beating the initial target of 4.8 percent as set out under the 2004 state budget.

"We were able to beat the target and reach 5 percent to 5.1 percent growth in 2004," Aburizal told a mining seminar here.

In comparison, the economy grew by 3.8 percent and 4.1 percent in 2002 and 2003 respectively.

Aburizal added that the fairly strong growth was supported by relatively benign inflation and the low Bank Indonesia's benchmark interest rate (SBI).

The low inflation and interest rate helps maintain and boost people's purchasing power and keep strong domestic consumption in place.

In total, consumption makes up about 65 percent to 70 percent of GDP.

The Central Statistics Agency (BPS) is slated to announce the country's 2004 economic growth on Wednesday.

Indonesia, with some 40 million of its 220 million people living at and below the poverty line, needs to pick up its economic growth to help contain the problem.

Moreover, about 2.5 million new workers are entering the country's job market each year, meaning that the economy has to expand by at least 6 percent just to accommodate that.

Aburizal said that from this year on, a pick up in exports and investment was a must, as "We cannot rely on consumer spending to continue supporting growth".

With early signs of investment revival in 2004, Aburizal was optimistic that investment would fare better this year, providing more support for growth.

The government expects the economy to expand by 5.5 percent this year.

In the seminar, the minister also said that the new government targeted economic growth of 7.6 percent by 2009.

"That can only be reached if the investment ratio in relation to GDP could reach 28.4 percent by 2009, from 20.5 percent last year."