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

JAKARTA (JP): Experts said that Indonesia's economic recovery could be pushed back amid fears that the terrorist attacks 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 every reason to believe that the U.S. is heading toward a full-fledged economic recession, which will definitely negatively affect the world economy including Indonesia," noted economist Sjahrir told The Jakarta Post on Wednesday.

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

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

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

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

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

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

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

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

"The attacks will have a significant impact on the global economy, including Indonesia. How badly we will be hurt, we will have to wait and see," Sjahril told reporters after attending a session of his trial in 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 such concerns, saying that the 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 any 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 as a place to put their money in."

"Hopefully, some of that will also come to Indonesia," Laksamana said.

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

"The attacks will have negative impacts if U.S. banks cannot clear transactions, which will result in a downturn in trade," 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 exports to the U.S.," Anton told.

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