RI growth to be better next year
RI growth to be better next year
Dadan Wijaksana, The Jakarta Post, Jakarta
While many people are worried about the economic outlook for
next year because of the legislative elections and the ending of
the International Monetary Fund (IMF) bailout program, many
economists are filled with optimism.
Indonesia will embark on its first direct presidential
election next year. It will also end an IMF program that was
crucial in helping the country weather the economic crisis.
Yet, as evidenced by the predictions of various respectable
economic think thanks, confidence is running high that the
economy will in fact fare better next year than this year.
On Thursday, StanChart Bank joined that group, saying the
economy would expand by 4.3 percent next year on the back of
domestic consumption. The economy grew by an estimated 3.8
percent this year.
Previously, Bank Mandiri and the Asian Development Bank (ADB)
predicted a better economic performance in 2004, although there
were differences in their figures.
Mandiri set its 2004 growth forecast at 4.2 percent and the
ADB at 4 percent. This is compared to this year's predictions of
3.9 percent and 3.4 percent, respectively.
StanChart global economist Fauzi Ichsan said economic growth
would still rely heavily on domestic consumption, as has been the
case the last three years.
"Consumption will still be the backbone of the economy,
contributing about 3.8 percent of the total GDP," Fauzi said.
Fauzi said exports would likely contribute about 1 percent of
GDP, offsetting the expected 0.5 percent contraction in
investment.
He did not go into detail, but his assessment appears to
confirm the government's upbeat outlook for the economy in 2004.
The government's estimates are based on assumptions that the
legislative elections will help boost consumption as political
parties spend huge amounts of money on their campaigns.
The government, in the 2004 budget draft, said the economy
would expand next year by 4.5 percent from the targeted 4 percent
this year
Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti has said the elections will create massive spending spree
across the nation, improving economic growth.
Still, all this optimism will quickly disappear if the
elections are plagued with problems.
But if they run smoothly, the election could become an
additional engine driving the economy thanks to more robust
consumers spending, analysts said. Spending has been on the
decline of late because there have been no improvements in public
income and the unemployment rate has continued to increase.
Analysts, however, say the projected economic growth next year
would still be insufficient to resolve the country's unemployment
woes.
They say Indonesia's economy needs to expand by about 6
percent to 7 percent annually to cut unemployment in the country.
With only 4 percent growth, abound 1.2 million new workers each
year will fail to find work.