Exports fuel robust growth

Exports fuel robust growth

JAKARTA (JP): The economy grew by a surprising 5.12 percent in
the third quarter year-on-year, driven by a strong export
performance.

The Central Bureau of Statistics (BPS) reported on Wednesday
that compared to the second quarter, the economy as measured by
gross domestic product (GDP), rose 1.97 percent.

The official GDP data shows the economy is growing faster than
most analysts expected. The market consensus for year-on-year
third quarter GDP growth was less than 5 percent.

"If there are no disturbances, the economy is expected to grow
by more than 5 percent this year," BPS deputy Kusmadi Saleh said
during media conference.

The government recently revised upward its economic growth
forecast for the year to between 4.5 percent and 5 percent,
compared to the initial projection of between 3 percent and 4
percent.

The economy grew by a slight 0.23 percent in 1999 after
contracting by nearly 14 percent in 1998.

BPS said the stronger than expected GDP growth was mainly
driven by exports, not consumption.

The bureau said exports in the third quarter grew 4.53 percent
to Rp 28 trillion (US$3.2 billion on the average rate during that
period) from the second quarter, based on 1993 constant prices.

The bureau said household consumption, the main engine for
economic growth last year, only grew 0.8 percent to Rp 68.9
trillion in the third quarter.

It said that in this same period government consumption
declined 5.75 percent from Rp 7.5 trillion to Rp 7 trillion.

It added that gross capital formation fell (in real terms or
based on 1993 constant prices) 0.92 percent to Rp 20.8 trillion
from Rp 21 trillion in the second quarter.

BPS said the economic growth was not only export-driven, but
was also a broader-based growth.

"Almost all sectors in the economy in the third quarter posted
growth compared to the second quarter, except the services
sector," BPS said.

It said the largest gain was made by the agriculture sector,
which grew 3.86 percent; followed by the electricity, gas and
water sector (3.20 percent); trade, hotel and restaurant sector
(2.02 percent); transportation and communications (1.66 percent);
mining (1.30 percent); and construction (0.92 percent).

The bureau said the services sector, however, contracted 0.02
percent.

Based on 1993 constant prices, third quarter GDP was Rp 295.8
trillion but on current market prices the GDP was valued at Rp
948.8 trillion. In comparison, GDP based on current market prices
for all of 1999 totaled Rp 1,119.4 trillion.

But Kusmadi warned the positive economic growth could be
derailed if the exchange rate of the rupiah was "uncontrollable".

The rupiah has been under intense pressure over the past few
months due to a combination of external factors and political
uncertainty at home. The rupiah has now fallen more than 23
percent against the U.S. dollar since early this year.

Analysts also have said political instability continues to
overshadow positive news on the economic front.

According to experts, fresh capital is crucial to support
exports, but political jitters have discouraged investors from
entering the country.

President Abdurrahman Wahid has faced increasing pressure to
step down, and social unrest and violence continue to rock the
regions.

Kusmadi also called on the central bank to relax its monetary
policy to push the banking sector into lending more money to
exporters.

He said this step would not necessarily trigger inflation as
long as there was no disruption in the supply of raw materials.

Bank Indonesia has been guiding interest rates upward in a bid
to help stabilize the ailing rupiah and curb inflation, which has
been on the rise due to the recent increase in fuel prices and
transportation costs.

Meanwhile, the Danareksa Research Institute said on Wednesday
GDP growth in 2000 might be higher than its forecast of 4
percent.

"Overall, economic activity seems to be going well and
surpasses the previous forecast consensus," Danareksa said.

It said indicators like the sale of motorcycles, exports and
fuel and electricity consumption showed much greater growth than
the previous year. (rei)