Economy grows slower in first-quarter

Economy grows slower in first-quarter

Fitri Wulandari, The Jakarta Post, Jakarta

Despite the increasing stability in a number of monetary
indicators, the economy grew at a slower rate in the first
quarter of this year amid weakening household consumption.

The Central Statistics Agency (BPS) reported on Monday that
gross domestic product (GDP), which measures goods and services,
rose by 3.43 percent in the first three months of the year
compared to the same period last year. But this growth rate was
slightly slower than the same year-on-year rate of 3.81 percent
posted in the previous quarter.

The agency said that GDP expanded by 2.04 percent when
compared to the fourth quarter of last year.

Household consumption, which accounts for nearly a quarter of
GDP and has been the main driver of economic growth during the
past several years, declined by 1.23 percent from the previous
quarter.

Analysts have said that the rising unemployment problem has
weakened consumption.

Meanwhile, government spending and investments declined by
12.49 percent and 4.83 percent respectively. Last year, foreign
direct investment approvals dropped by 35 percent amid the
unfavorable investment climate here.

But BPS predicted that government spending would rise in the
run-up to 2004 general elections.

The first-quarter GDP performance was greatly helped by a 1.57
percent growth in exports, mainly commodities and low-end
manufacturing products, which are relatively less susceptible to
the current global economic slowdown.

BPS said that on the production side, the first-quarter
economic growth was mainly driven by a 15.56 percent growth in
the agriculture sector, which traditionally is in the harvest
season during the quarter.

Other sectors of the economy were either contracting or
growing at a rate of less than 1 percent.

Economist Chatib Basri, however, said the slower first-quarter
growth was not a serious concern as the current stability in a
number of monetary indicators like inflation, exchange rate, and
interest rate, should bode well for achieving 3.7 percent growth
this year.

He said that a low inflation environment should push consumer
spending higher this year.

The government has targeted 4 percent growth for 2003 after
the economy grew by 3.7 percent last year.

Nonetheless, Chatib said the growth rate remained insufficient
to reduce rising unemployment in the country.

Economists have said Indonesia needs to shift gear to high
speed economic growth of 6 percent to 7 percent to provide more
employment.