Global slowdown, SARS still a threat to RI economy
Global slowdown, SARS still a threat to RI economy
Dadan Wijaksana, The Jakarta Post, Jakarta
As the war in Iraq comes to a conclusion, one uncertainty
clouding the world economy has now been lifted. But the prospects
for the Indonesian economy remain gloomy due the threats posed by
the flu-like disease, SARS, economists say.
StanChart economist Fauzi Ichsan said that although the Iraq
war was relatively short, it still had a negative impact on the
world economy, which in turn would also affect the local economy.
"We predict that the world economy will now grow by around 3
percent with the war, as compared to around 4 percent without the
war. This will obviously have an impact on the domestic economy,"
Fauzi said.
By comparison, the global economy posted growth of around 2.8
percent last year.
Even without the war, a rebound in the global economy would
still take some time because of the continued slow pace of
recovery in the U.S., Fauzi added.
The U.S. is one of the world's major economic dynamos, with
around one third of the world's total exports being absorbed by
the country. It is also one of Indonesia's main export
destinations.
A slower recovery in the U.S. would only further slow down the
already fragile world economy.
"Not to mention what will happen if the United Nations (UN)
and European Union (EU) are not included in the Iraq
reconstruction program. In such a case, the U.S. would have to
shoulder the huge financial burden alone.
"This would put more pressure on the U.S. economy," he said.
Analysts have predicted that at least US$100 billion will be
needed to rebuild Iraq.
Fauzi was commenting on the country's economic prospects now
that the Iraq war is virtually over following the taking of
control of Baghdad by U.S. ground forces last week.
The three-week war, which was much shorter than anticipated by
many, lifted earlier fears of another round of world recession
should it have turned out to be prolonged.
But, not only had the war already taken its toll on the world
economy, the recent emergence of Severe Acute Respiratory
Syndrome (SARS) would also have the potential to further slow
down global growth.
SARS, which has claimed many lives throughout the world, was
damaging the tourism sector worldwide, especially in countries
heavily dependent on the service-based economy.
"But, equally importantly, it further damages investor
confidence in the global economy, including Indonesia's economy,
which is in dire need of investment," Fauzi said.
Another thing that had the potential to damage the economy
here was international oil prices.
After soaring in the run-up to the war, oil prices have
steadily come down, with analysts fearing they could sink below
$22 per barrel, the benchmark level set in the 2003 state budget.
If that happens, the government would somehow have to make up
the loss in potential revenues generated from oil exports.