Officials: Economic Growth May Drop To 3% as Exports Tumble

The Jakarta Globe, Dion Bisara & Bloomberg, March 27, 2009

The national economy may only grow by 3 percent this year because of problems caused by rapidly shrinking exports, which are expected to slump to record lows this year, two senior officials said on Friday.

The comments are the lowest predictions so far about growth this year and provide yet another contrast to President Susilo Bambang Yudhoyono’s rosier hopes early in the month, when he projected the economy could grow by between 4.5 and 5 percent.

Speaking in a morning press conference, Trade Minister Mari Pangestu said that the economy might expand by as little as 3 percent this year, as exports slumped and commodity prices plunged from record levels. The value of overseas shipments may shrink between 15 percent and 20 percent in 2009, she said.

Her comments were later echoed by Miranda Goeltom, a senior deputy governor at Bank Indonesia, the central bank. She said BI might revise its growth prediction to between 3 percent and 4 percent this year, from an earlier BI projection of 4 percent to 4.5 percent growth in 2009.

“The growth decline was due to falling exports and a lack of foreign-exchange liquidity weighing on investment,” she said.

Anwar Supriyadi, director general of customs, said that by March 20, data from ports showed that quarterly export volumes and values had dropped by 30 percent and 38 percent, respectively. “They will continue to fall as the economic slump continues,” he said.

Exports fell between November and January as foreign demand slowed. The International Monetary Fund has said that the global economy would contract by 0.5 percent to 1 percent this year.

This is a downward revision of 1 percent to 1.5 percent from the IMF’s January World Economic Outlook, reflecting just how rapid and severe the global recession has become.

But Goeltom said that the stimulus package could act as a buffer, preventing growth from slowing further.

“Whether growth is near 3 percent or not, we’ll have to wait until the stimulus package kicks in,” she said. “But we’re still one of the only countries in the region that’s likely to post positive growth.”

The government hopes that the disbursement in April of Rp 12.2 trillion ($1.06 billion) in infrastructure funding — part of the Rp 73.3 trillion fiscal stimulus package — will create jobs and stimulate household spending, which accounts for about 65 percent of national growth.