Stanchart sees 2002 GDP growth at 3.8 percent

Adianto P. Simamora, The Jakarta Post, Jakarta

Standard Chartered Bank said Indonesia's economy should be relatively unscathed by the threat of a global economic slump and grow by 3.8 percent next year, driven particularly by strong domestic demand.

Standard Chartered economist Fauzi Ichsan said that a more stable domestic political environment should revive consumer confidence to spend more.

"Next year's gross domestic product (GDP) growth will be particularly fueled by strong domestic consumption as the political condition improves," Fauzi said on the sidelines of a seminar.

He explained that domestic consumption would likely contribute a hefty 75 percent to next year's GDP, compared to investment with 18 percent and net exports with 8 percent.

The government forecasts 2002 economic growth at 4 percent from an estimated 3.5 percent this year. Standard Chartered estimates this year's growth at 3.3 percent.

Minister of Finance Boediono has also said that Indonesia should be able to relatively cushion the impact of a global recession on the back of stronger domestic demand.

The government initially targeted a 5 percent GDP growth next year, but it later revised the figure down to 4 percent following the Sept. 11 terrorist attacks on the U.S.

There have been fears that the global slump will deal a serious blow to the country's economy as exports will be hard-hit by the downturn in major markets, such as in the U.S. and Japan.

But Fauzi said that the Indonesian economic recovery would be more dependent on reforms than on the world's economy.

"Only through reforms can the government stimulate a more sustainable economic recovery," he said.

Separately, the chief economist of the United Nations Support Facility for Indonesian Recovery (UNSFIR) Satish Mishra said that Indonesia had become too reliant on foreign investments to bail out the economy.

"You shouldn't have an entire economic policy based on the thinking that if you could just get foreign investment all the problems would be solved," he said on the sidelines of a seminar on business and investment prospects.

Mishra said that the government should make economic policies based not only on the interests of foreign investors, but also domestic investors, labor unions and regional governments.

"I don't share the view that if there are no foreign investors the country will be full of shoeshine boys," he added.

The government should explain the reasons behind the economic policies to the public and "get the views of people whose lives are affected," Mishra said, adding that this was what the government had failed to do.