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.