HSBC sees strong consumer spending

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.