First quarter growth higher but unimpressive: Economists

First quarter growth higher but unimpressive: Economists

Rendi A. Witular, Jakarta

The economy grew at a higher rate than expected in the first
quarter of this year, but remained unimpressive compared to other
countries in the region, as growth was primarily driven by
domestic consumption.

The Central Statistics Agency (BPS) reported on Monday that
the economy, as measured by gross domestic product (GDP),
expanded by 4.46 percent in the first quarter, compared to the
same period last year.

The agency said household consumption and government
consumption increased by 5.71 percent and 12.75 percent,
respectively.

"Domestic consumption has again been the primary driver, as it
accounted for 69.14 percent of the GDP in the first quarter, up
from 67.25 percent in the same period of 2003," said BPS deputy
chief La Ode Syafiuddin.

Stronger consumer loans from banks amid a declining interest
rate environment and low inflation, plus general elections
spending, have boosted domestic consumption.

La Ode explained that if the situation remained conducive,
with less fluctuation in the rupiah and stable oil prices,
economic growth this year could fare better than last year and
would probably meet the government's target of 4.8 percent.

"The impact of the recent fall in the rupiah and surging oil
prices will be reflected in second and third quarter growths," he
said.

Senior economist of Mandiri Securities Khalil Rowter said the
country's economic growth was unimpressive, as it remained
largely dependent on domestic consumption, rather than on export
and investment.

"The growth is higher than our forecast of 4.4 percent. But as
in previous years, it is nothing special. Export and private
investment need to be boosted in order to achieve a strong and
sustainable growth," said Khalil, projecting that the GDP this
year would reach 4.6 percent.

Indonesia, the largest economy in Southeast Asia, has been
lagging behind its neighbors in terms of the pace of economic
recovery, mainly due to weak investment, a key factor for the
country to accelerate growth to more than 6 percent and help
resolve its chronic unemployment problem.

In the first quarter, investment increased 4.24 percent, but
from a very low base a year ago. Meanwhile, exports grew only
0.85 percent in the first quarter.

In the case of Thailand, robust private consumption over the
past two years was being overtaken by strong private investment
and exports, while in Malaysia, big government spending was being
overtaken by stronger private investment fueled by the growth of
small and medium enterprises and expanding export.

Economist Chatib Basri said robust domestic spending during
the first quarter would likely surge higher in the second
quarter, because the majority of the general elections
expenditures had yet to be calculated.

"We will see higher growth in the second and third quarters on
higher spending during and ahead of the general elections. I
estimate that the GDP will reach 4.7 percent for 2004," he said.

The statistics agency said almost all economic sectors enjoyed
higher growth in the first quarter, except the mining sector,
which contracted by 2.72 percent.

The agriculture sector grew by 1.53 percent, manufacturing by
5.46 percent, utilities 2.16 percent, construction 7.31 percent,
trade, hotels and restaurants 6.13 percent, transportation and
communications 13.81 percent, finance 4.85 percent and services
4.37 percent.

The agency has applied a new calculating standard for this
year's GDP, the United Nations latest standard, which bases GDP
calculation on the 2000 constant price instead of the 1993 price.