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Business group sees bright outlook on rising investment
The business community sees a fairly bright economic picture this year, revising upwards its growth projection for a number of key industrial sectors, in part because of higher estimates both for domestic investment and for inward foreign direct investment
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he business community sees a fairly bright economic picture this year, revising upwards its growth projection for a number of key industrial sectors, in part because of higher estimates both for domestic investment and for inward foreign direct investment.
With these higher growth estimates in key sectors, the Indonesian Chambers of Commerce and Industry (Kadin) Tuesday revised upwards its own economic growth forecasts, having initially forecast growth rates between 5.4 percent and 5.9 percent.
It now forecasts that economic growth is more likely to land between 5.4 percent and an optimistic 6.5 percent.
”The government’s [growth] estimate is 5.5 percent. But we expect an even higher figure than that,” Kadin’s head of the Institute for Economic Studies, Research and Development, Faisal Basri, told the media.
Faisal said that the upward revision was based on optimism on investment growth, which Kadin now estimates will increase between 7.5 and 8.6 percent, boosted by advance estimates that higher-than-expected domestic and overseas investments can be expected.
Bank lending, the main source of domestic investment, is estimated to grow this year by 20 percent — even higher than the 15 percent target set by the central bank.
As of November 2009, the growth rates for 2009 for working capital loans stood at 13.54 percent, investment loans 12.66 percent and consumer loans 15.92 percent, according to central bank data.
“The loan to GDP [Gross Domestic Product] ratio in China is 140 percent, in Malaysia is 120 percent and in Vietnam is 100 percent. Why are we at only 30 percent?” Faisal said, underlining one reason why lending would improve this year.
Concerning sectors, the largest upward revisions came from key growth industries such as manufacturing (from 3.9 to 5 percent), construction (from 6.9 to 7.5 percent) and hotels and restaurants (from 5.7 to 6.5 percent), although financial sector growth could be lower at 6.9 to 7.4 percent.
“In all honestly, this [upward revision] shows to the government that the business community is optimistic [this year],” said Faisal.
On the trade balance, Kadin estimates that growth of goods and services exports would be offset by surging imports in the coming year.
“Export growth would be lower than import growth.”
Growth targets for exports of goods and services have been revised upward from 6.4 percent to a maximum of 7.1 percent, while imports of goods and services are forecast at between 8 percent and 8.8 percent this year.
Trade Minister Mari Elka Pangestu has said the government has forecast that exports will grow by 5 percent this year as the global economic downturn is giving way to an economic recovery phase.
According to the Central Statistics Agency (BPS), total exports of goods stood at US$86.64 billion in the January-November period last year (2009), 19.5 percent lower than the $103.15 billion recorded in the same period a year earlier (2008).
Meanwhile, the country spent $86.58 billion on total imports of goods in the January-November period last year, down by 28.75 percent from the $121.5 billion booked in the same period in 2008.
Faisal said Kadin had taken into account the impact of free trade agreements between ASEAN and China (AC-FTA) and among ASEAN members (AFTA) in forecasting this year’s export and import growth.
He added that these FTAs would not affect the economy significantly as Indonesia had started to gradually liberalize its domestic market since 1998, leaving only 5 percent of all the categories of goods still protected.
