RI economic growth could be slower with long war: Economists
RI economic growth could be slower with long war: Economists
A'an Suryana, The Jakarta Post, Jakarta
If the war in Iraq goes on for more than six months, the global
economy will be in tatters, and Indonesia's economic growth will
be much slower than expected, economists said on Monday.
Economist Iman Sugema from the Institute for Development of
Economics and Finance (Indef) predicted that gross domestic
products would grow by only 2.4 percent this year -- compared to
the government's target of 3.8 percent -- if the war dragged on
for more than six months.
Iman Sugema attributed the lower growth target to less
investments, decreasing exports and the collapse of the tourism
sector due to the long war.
In the event of a long war, he said, Indonesia's exports would
likely decrease by 5.5 percent due to disruptions to sea
transportation around the Middle East.
A long war would likely also discourage long term investment
in Indonesia, and therefore, investment growth in Indonesia could
decline by 4.8 percent.
Economist Umar Juoro from the Center for Information and
Development Studies (CIDES), shared Iman's view, noting that
international trade would be affected by increasing
transportation charges and insurance premiums.
"The long war will also disrupt international flights and
tourism," said Umar at a media conference at the CIDES'
headquarters here.
Monday's news of U.S. and British casualties in Iraq triggered
fears in the foreign exchange and stock markets that the war in
Iraq might last longer than expected.
In order to prevent the adverse effects of a possible long
war, the economists said that the government should prepare
various anticipatory programs.
Meanwhile, businessman Aburizal Bakrie, who is also the
chairman of the Indonesian Chamber of Commerce and Industry
(Kadin), called on Bank Indonesia to loosen some of the
requirements for commercial banks so that the latter could
provide cheap loans to local businesses to propel growth.
Nowadays, banks remain reluctant to increase lending for fear
that their capital condition could fall below the central bank's
minimum requirement and that their non-performing loans could
rise above the set ceiling, Aburizal said recently.
Nevertheless, if the war proceeds quickly, the prospects for
average growth of three percent to four percent would remain,
economists said.
If the war lasts for only two weeks, for example, Indonesia's
exports will likely slide by only 0.31 percent, said Iman.
Moreover, if the war ends in one week's time, the impact would
be kept to a minimum.
Therefore, Iman said, it all depends on the war. If it's long,
Indonesia will have a difficult time, but if it's short, the war
will not inflict any losses on the country's economy.