RI economy to suffer from attacks in U.S.: Experts

JAKARTA (JP): Experts said that Indonesia's economic recovery could be pushed back after terrorist attack in the U.S. could trigger a deeper global economic recession.

"The U.S. already had serious problems with the fall of the Dow and Nasdaq indexes. Now, we have all the reasons to believe that the U.S. is heading toward a full-fledged economic recession, which will definitely affect negatively the world economy including Indonesia," noted economist Sjahrir told The Jakarta Post on Wednesday.

"The U.S. is the heart and nerve of the entire financial system and if it comes under attack, there will be repercussions everywhere," he said, adding that the repercussions would definitely affect Indonesia permanently.

He said the attacks would force the U.S. to spend more on domestic defense issues and less on international assistance and humanitarian assistance.

"Indonesia cannot rely on outside resources, especially the U.S., to achieve economic recovery," Sjahrir said.

Sjahrir was commenting on the impact of the devastating terrorist suicidal attacks on the World Trade Center in New York and other U.S. government buildings in Washington Tuesday morning.

Although the full impact of the terrorist attack on the economy has yet to be calculated, economists predict that unless world central banks particularly those of developed nations take necessary integrated measures, the world economy could tumble into a deeper recession and even depression.

Separately, economist Bustanul Arifin of the Institute for Development of Economics and Finance (Indef) urged the government to consider revising its economic assumptions for the 2002 budget year, arguing that with the U.S. now heading toward a deeper economic recession, it becomes increasingly impossible for Indonesia to achieve the economic targets.

Under the 2002 state budget draft, presented by the government last week, the exchange rate is assumed at Rp 8,500 per U.S. dollar, inflation 8 percent, economic growth of 5 percent and international oil price of $22 per barrel.

Bank Indonesia Governor Sjahril Sabirin said that the terrorist attack could weaken Indonesian export because the U.S. was Indonesia's major export market.

"The attacks will have a significant impact on the global economy including Indonesia. How bad we will be hurt, we have to wait and see," Sjahril told reporters after attending his trial at the South Jakarta district court.

Sjahril also said the central bank would try to find a way to minimize the impact. He did not elaborate.

Finance Minister Boediono, however, played down the above concern, saying that U.S. economy was strong enough to weather the repercussions.

"I think the U.S. economy is so strong that the attacks will not have as big an effect as we think," he said, adding that the effects would be temporary.

Separately, State Minister for State Enterprises Laksamana Sukardi said the terrorist attacks could be a blessing in disguise for Indonesia "since investment in Japan and the U.S. is slowing down, investors may be looking at China to put their money."

"Hopefully some will also go to Indonesia," Laksamana said.

Citibank Economist Anton Gunawan said it was still too early to tell the impact of the terrorist attacks against U.S. on Indonesia's economy.

"The attacks would have negative impacts if U.S. banks could not clear transactions, which will result in the downturn of trade activities," he said.

But if "the U.S. declares an all-out war against terrorism by increasing its defense budget, the spending would stimulate economic growth, which in turn could boost the country's export to U.S.," Anton told.

According to Anton, the attacks would severely affect investors' confidence in U.S. market, and may encourage international investors to relocate their business to other countries including Asian nations. (tnt/03/10)