Economy 'resilient despite woes'

JAKARTA (JP): The Indonesian economy will continue to grow and will expand by between 3 percent and 4 percent this year despite prevailing uncertainties on the political front, economists predicted here on Thursday.

Economists Hadi Susastro, M. Sadli and Raden Pardede said that the impact of the political woes on economic activities would not be as serious as in the past because most business players have become more resilient.

They said that the country's business communities are less affected by political uncertainties because they had learned how to cope with volatile conditions in the past.

"What ever happens in the political environment, we are not going to see a growth that is less than three to four percent," Hadi, an economist from the Center for Strategic and International Studies (CSIS) said during a seminar on political and economic outlook.

The Indonesian business community has faced political uncertainties for the past two years and are now able to "muddle through" any situation, he told reporters in a press meeting.

Small and medium enterprises in traditional and informal sectors are better shielded from the crisis compared to major enterprises, he said.

"We have developed economic endurance - we will survive" he assured.

But, Hadi added, these small sectors are growing very slowly and consequently, are unable to become the driving force behind the nation's economic recovery.

He said that it would take about five years to bring Indonesia completely out of the crisis.

Senior economist M. Sadli shared Hadi's optimism for moderate economic growth, but urged President Abdurrahman Wahid to reshuffle his cabinet so that he would not need to meddle in economic affairs.

"Such changes are expected to create some fresh air that will raise local confidence and eventually bring a positive result to the market," he said.

They also agreed that business confidence would be even stronger after the President gave his accountability in the General Session of the People's Consultative Assembly (MPR) in August.

However, analyst Raden Pardede of the Danareksa Research Institute said there was no guarantee that the political environment would improve after MPR's annual meeting.

"The nature of our democratization and the distribution of seats in parliament suggest that the power struggle will persist up to 2004," he said.

But he added that economic growth of three to four percent is reasonable, even if the political environment is not supportive.

Raden said the effective strategy for the business community is to ignore political affairs.

"I suggest the business community ignore political uncertainty and continue to work optimally for survival reasons. A better political environment would just be a bonus for all," he said.

He said there was still a good chance for the country's economy to continue its recovery in the second half of the year although it would be difficult to achieve the GDP growth of between 5 percent and 6 percent projected by the government.

CSIS economist Haryo Aswicahyono said that strong consumer confidence is behind the estimated three to four percent growth rate this year.

He said that consumer confidence had picked up following the election of President Abdurrahman last October.

This is particularly evident in the higher car sales and export sales, which reached a record high of US$4.94 billion in March 2000, he said.

However, Haryo said, the high level of consumer confidence cannot be sustained for long because expectations for the current government are too high.

On the depreciation of the rupiah, Haryo estimates that the currency will continue to drop.

Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie has said that a weak rupiah over an extended period would hurt the fundamental economy that thus far has showed improvement.

"If the rupiah remains weak our economic indicators will be hurt," he told reporters.

The rupiah gained ground on Thursday in moderate trading ending the day at Rp 9,275 against the U.S. dollar after falling to a 16-month low on Wednesday due to political uncertainty.

The Indonesian currency closed at Rp 9,395 late Wednesday in panic trading as most market participants dumped the currency on fears of growing conflict between the President and MPR.

Nevertheless, he said that the impact of the rupiah's fall would be less than it was during the crisis in 1997 and 1998.

"It will have a different impact, because since the crisis began industries have learned to utilize local content, thereby surviving the crisis," Haryo said. (bkm/cst)