Fri, 21 Mar 2003

War will hamper economic recovery: Bank Indonesia

The Jakarta Post, Jakarta

Bank Indonesia senior deputy governor Anwar Nasution said on Thursday the war in Iraq would hamper Indonesia's economic recovery.

He said the war would inevitably affect the country's economic fundamentals.

"If exports fall sharply ... it will affect the economic recovery process," Anwar was quoted by Antara as saying during a lecture at a university in Malang, East Java.

The country plunged into a severe economic crisis in 1998. Since last year, the economy has begun to show signs of recovery, with the government projecting economic growth of 4 percent this year.

Analysts earlier said the war in Iraq would negatively affect a number of Indonesia's economic sectors.

Exports are expected to slow as a result of the war, particularly if it drags on for any length of time. Analysts say war would undermine the already fragile economies of developed countries, Indonesia's major export destinations.

The local tourist industry, which has just begun to recover from the devastating impact of the Oct. 12, 2002, Bali bombings, is also expected to suffer, with foreign tourists afraid to travel to the country on concerns over anti-Western sentiment. Tourism has been a major contributor to Indonesia's foreign exchange revenue.

Analysts say the war will also affect the country's fiscal situation, with the key privatization program having to be delayed amid the global uncertainty.

Meanwhile, Minister of Finance Boediono told reporters that the government was preparing a contingency plan to minimize the impact of war on the economy, particularly on the supply of fuel products and food, and on exports.

He did not go into detail on what measures would be taken by the government.

But state-owned oil and gas firm Pertamina earlier said the government should limit the export of crude oil by foreign contractors to help ensure the supply of fuel products at home.

The government will also delay the planned overhaul of oil refinery facilities to help ensure the domestic fuel supply.