G3 economies to slow down, import demand to drop
G3 economies to slow down, import demand to drop
Zakki P. Hakim, The Jakarta Post, Jakarta
The economies of the United States, Europe and Japan are expected
to slow down this year, which will pose a modest threat to Asian
exporters including Indonesia, as the decelerating economies will
consequently have less demand for imports, a leading economist
says.
BNP Paribas Chief Economist for Asia Pacific Andrew Freris
said the impact on Asian exporters would be relatively modest, as
between 30 percent and 45 percent of Asian trade was done with
fellow Asian countries outside Japan.
Citing an example, he pointed out that a third of Indonesian
exports between 1998 and 2004 went to Singapore, South Korea,
China, Malaysia, India, Thailand and the Philippines.
As demand was about to drop, Freris forecast that global
commodity prices would also go down and oil prices would be no
exception.
"We forecast that oil prices could go down as far as US$40 per
barrel from the current average of $47 a barrel," he said in his
presentation, Global Financial Developments and the Implications
for Asia and Indonesia, on Wednesday.
The economist said the G3 economies -- the U.S., Europe and
Japan -- were to slow down in 2005 with Japan and Europe re-
accelerating in 2006.
"Interest rates in the U.S. are to continue to rise until year
end, while in Europe, rates are to stay flat until later this
year. Interest rates in Japan will not increase until deflation
ends," he predicted.
Meanwhile, Freris said, the U.S. dollar was to weaken against
the euro and yen, while all Asian currencies, including the
rupiah, were to strengthen against the dollar throughout the rest
of the year.
He predicted that the rupiah could appreciate to Rp 9,000 to
the U.S. dollar in the first quarter next year.
He went on to say that the Chinese renminbi would not revalue
in 2005 but register only a widening of the trading bands.
Moreover, he was optimistic that Indonesia could grow at over
9 percent by 2009, if the country could secure foreign direct
investment (FDI) of up 25 percent of the gross domestic product
(GDP), provide adequate infrastructure and maintain efficiency in
the financial sector.
He stressed that Indonesia needed FDI to build the
manufacturing sector and boost domestic and foreign trade, in
order to accumulate enough foreign exchange reserves to lessen
the country's foreign debt.