Economy 'resilient despite woes'

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)