HSBC sees strong consumer spending

P.C. Naommy, The Jakarta Post, Jakarta

The HSBC Bank sees consumer spending as continuing to be the main economic growth engine for the country this year.

The bank forecast gross domestic product (GDP) to grow by around 3.9 percent in 2004, lower than the government's 4.8 percent projection.

"We still think that consumer spending will hold an important role in boosting economic growth this year," said Radianto Kusumo, head of debt markets and sales for HSBC, on Wednesday.

Radianto said that there were four key factors which would help push private consumption this year.

These are: easier access to bank credit, strong household savings, low interest rate environment, and the young demographics in Indonesia.

According to Radianto, the easier access to credit in Indonesia was indicated by the growing number of loans to individual borrowers in 2003, while in terms of household savings, Indonesia is among the strongest in Asia.

Radianto added that with the household debt level now at only 10 percent of GDP, the government has managed to place Indonesia among the lowest in terms of household debts compared to other countries in Asia.

Several economists have also said that economic growth this year would still be dominated by domestic consumption particularly during the general election when political parties spend a lot of money for campaigning purposes. But with new investment (both foreign and domestic) remaining scarce, the economy would not be able to grow at a rate needed to create jobs for the large number of unemployed people.

Radianto said that without new investments in machinery and other areas, it would be difficult for the country to boost exports, which theoretically could also push economic growth higher.

Radianto urged the government to move fast in legal reform to help attract new investments.