Indonesia faces gloomy economy: Expert

Tantri Yuliandini, The Jakarta Post, Jakarta

The government's economic growth forecast of 5 percent for 2002 will not be achieved given that the rest of the world is heading for a recession, senior economist Syahrir said on Monday.

Whereas, the world was previously only looking at a global slowdown, the Sept. 11 terrorism incident had ensured a recession, he said in a one-day seminar on Indonesia's advertising prospects organized by The Jakarta Post.

He said that the advertising industry should brace itself for a rough time in 2002, and "don't believe that 5 percent growth will be achieved".

Syahrir explained that all the signs indicated that the country was heading for a fall.

The stronger rupiah and stock market enjoyed after President Megawati Soekarnoputri's ascent to the presidency were short-lived, he said.

In September, the rupiah was back in 9,000 territory against the U.S. dollar, after briefly enjoying strong rates around the 8,500 level, Syahrir said, explaining that the exchange rate had steadily declined afterwards, and especially after the terrorist attack in the U.S. on Sept. 11.

"The rupiah's slump was also followed by the declining (Jakarta Stock Exchange - JSX) composite index. After a high of 470 it never recovered again, and this morning it was at 392," he added.

The dollar closed at Rp 9,880 to the U.S. dollar on Monday, up from Rp 9,700 Friday.

The JSX composite index ended down 1 percent, or 3.804 points, at 388.67. Volume was light at 244 million shares, valued at Rp 207 billion (about US$21 million).

Syahrir said that, although earnings from exports last year had been very high, it did not affect the rupiah's exchange rate as all transactions had been conducted through overseas accounts and did not contribute to the net supply of foreign exchange at home.

He noted that, between January and July this year exports had been steadily declining compared with the same period last year, which had been caused by a global economic slowdown.

Imports, however, had increased to more than $4 billion in the first seven months of the year, Syahrir said, adding that this was a good sign as there may have also been importing of capital goods, instead of just consumption goods.

He also said that, between this year and next year it would be difficult to achieve a single digit inflation rate.

The Central Bureau of Statistics (BPS) reported that September's year-on-year inflation rate was at 13.01 percent.

Separately, Minister of Finance Boediono said that, despite the gloomy predictions, the 5 percent growth estimate was still "achievable".

He said that, despite the International Monetary Fund's prediction that the Indonesian economy would only grow 4.3 percent next year, the IMF forecast was made without considering extra endeavors aimed at stimulating the economy.

"We will make this (the IMF figure) our benchmark and with extra effort we must achieve better than that," Boediono said on the sidelines of a hearing with the House of Representatives's committee on the state budget.

Marketing expert Rhenald Kasali warned that, when listening to economists, one should be aware that they are painting the wide picture of the economy, the macroeconomy, which could be gloomy.

"But when you're doing business you always have to be optimistic, but also calculative ... there are still segments that could grow," he said while attending the advertising seminar.

Rhenald said that the attacks on the U.S. should not be seen as the end for the economy, but rather as an opportunity, as the incident had reduced Americans' desire to consume expensive goods.

"Especially when shadowed by an impending recession, they will buy cheaper goods and that's where we come in," he said, explaining that where exports of high cost goods to the U.S. may decline, those of cheaper goods would not.

Rhenald also said that Indonesia should focus more on dominating the market from among the member countries of the Association of South East Asian Nations (ASEAN).

"They're closing in on us ... and we have to strike back to reach Southeast Asian markets where the buying power has improved," he said.

Small and medium enterprises still have the best chance for growth, Rhenald said, citing the "jamu" (traditional herb medicines) industry, which is now gradually being globalized, and the automobile components industry.

"Don't make the same mistake as last time, dreaming of making our own airplane industry. Better to create an automobile components industry where the market is bigger," Rhenald said.