Economy predicted to see modest growth next year
Economy predicted to see modest growth next year
A'an Suryana and Dadan Wijaksana, The Jakarta Post, Jakarta
The country's economic growth rate next year is projected to be
only slightly higher as investment and export will remain weak,
according to economists.
Danareksa Research Institute Raden Pardede predicted a 4.1
percent growth rate next year, slightly higher than this year's
estimate of 3.8 percent.
The government had targeted a 4 percent growth for 2002, but
the recent Bali bombing incident which had hit the country's
tourism sector forced economists to revise the growth target to
around 3.8 percent.
Raden said on Thursday that consumption would continue to
become the main driver of economic growth next year.
He said that the 50 percent increase in the salary of millions
of teachers in 2003 should help boost domestic consumption.
He said that the population of teachers plus their family
members was around 20 million.
He added that the sale of loan assets under the Indonesian
Bank Restructuring Agency (IBRA) should help companies to expand
their production activities as banks would likely reopen credit
lines.
But most economists have said that investors would remain
reluctant to put in new investments in the country due to
lingering problems such as labor conflicts, security threats, and
unfavorable tax policy.
Raden said that the government should act quickly to improve
the domestic investment climate as the country could not keep
relying on consumption for economic growth.
Meanwhile, Bank Mandiri chief economist Martin Panggabean
predicted a relatively flat growth of 3.8 percent for next year.
"The challenge would come from two fronts, the international
front and the cautious political mood ahead of the 2004 general
election here," said Martin.
He said that the looming war in Iraq could be short lived,
which would cause oil prices to decrease.
He said that this would be negative for the Indonesian economy
as it depended on oil as its main export revenue.
On the domestic front, the political situation might heat up
in the second half of year 2003, which would boost currency
volatility and lead to a weakening of the exchange rate of the
rupiah against the U.S. dollar.
Despite the challenges, there are some bright patches ahead
particularly if the U.S. economy really improves as some have
predicted.
He said that if the U.S. economy bounced back it would be an
opportunity for Indonesian exporters to expand their market.
He urged both exporters and the government to work together to
take advantage of such a possibility.
"In order to do that, the government must increase its
intermediary role of the banking sector and produce investment
incentives for several sectors, including palm oil and
chemicals," he said.
University of Indonesia economist Chatib Basri predicted an
economic growth rate of between 3.4 percent and 4.2 percent.
He said that a positive scenario could materialize if the
government kept implementing economic reform programs.