Indonesia's economy to grow as targeted despite bombing: IMF
Dadan Wijaksana, The Jakarta Post, Jakarta
Indonesia's economy can still grow by 3.5 to 4 percent this year in line with the initial projection, despite having to weather the impact of the JW Marriott Hotel bombing, Asia Pacific senior advisor Daniel Citrin of the International Monetary Fund said on Monday.
"We still think that growth within the range of 3.5 to 4.0 percent this year, which is the government target, is achievable. It is still early to say, but we still think it is achievable," Citrin told reporters.
Citrin is currently leading an IMF team to review the country's latest economic program, which could lead to another loan tranche disbursement of US$480 million -- one of the IMF's last two disbursements before the existing $5 billion assistance program ends this year.
Citrin did not explain the reasons behind his upbeat appraisal, but he was the latest to have voiced support for Indonesia's economic resilience, despite a series of internal and external shocks over the last few years.
Previously, analysts stressed that the latest terrorist attack could weaken investor confidence in the economy, but not to a level that would prompt capital flight.
This means the economic impact of the attack would likely be limited to certain sectors only, such as tourism and travel, and that it would not inflict any permanent damage on the economy. Thus, the economy would be able to expand as targeted initially.
Government officials and several economists pointed out the relatively quick recovery of the rupiah and the stock market as proof that investors were still confident about prospects here.
On Aug. 5, when a terrorist bomb exploded at the Marriott, the rupiah and stock index tumbled on panic selling with fears of capital outflows looming large.
The attack on the Marriott killed 11 and injured 148 others.
Nerves eventually subsided the following day, with both the rupiah and stock index -- crucial indicators to measure market sentiment on the economy -- regained most of the lost ground and began to recover.
On Monday, the rupiah closed at 8,540 per dollar, up from its close at 8,565 on Friday, which marked a rally for the fourth trading day since the attack. The stock index, however, was down 0.1 percent on profit taking, ending the day at 504.84 points.
The Central Statistics Agency (BPS) reported that the economy grew in the first quarter by 3.43 percent, with analysts predicting it would start to pick up in the second and third quarters, regardless of the bombing.
The IMF's optimistic remarks should provide further comfort for investors and market players in doing business here in the country, as its appraisal usually becomes the benchmark upon which other international economic institutions base their own assessments.
Citrin also concurred with a projection by the central bank on inflation, that a full-year inflation of around 6 to 7 percent was feasible, below the initial estimate of 8 to 9 percent.
The BPS reported recently that the relatively stable prices of consumer goods, some of which had even posted a decline, had eased pressure on the inflation rate, with accumulated inflation over the first seven months coming in at 1.29 percent, the lowest in 20 years.