Sluggish US Economy Threatens Indonesia
Wednesday, 15 November, 2006 | 13:31 WIB

Tempo Interactive, Jakarta: It is predicted that the United States’ economic growth will be sluggish next year and this will influence Asian economies, including Indonesia’s.

“Directly or indirectly, US economic growth influences Indonesia,” said Ian Morris, HSBC’s senior US economist, during a seminar entitled “The End of US Economy Upswing: Its Implication on the Indonesian Economy and Fixed Income Market,” in Jakarta yesterday (14/11).

He predicted that US consumption growth will drop from 3.2 percent this year to 2.1 percent in 2007.

The indication is that households in the US have already suffered a deficit of around six percent.

To maintain the consumption rate, US citizens must obtain higher loans.

“This is difficult,” he said.

Property sector growth is also a negative 13.8 percent, despite this sector having quite a significant macro effect on the US economy.

Robert Prior Wandesforde, HSBC’s senior Asia economist, said that globally US consumption was the highest in the world at 41.2 percent, 10 times higher than China.

US consumption drop will lower exports to this superpower country.

“If Asian countries’ exports to America drops, Indonesia’s export to the US will also be affected,” he said.

Thus, he predicted that Indonesia’s economic growth in 2007 would only be around 4.8 percent, lower than the government’s assumption of 6.2 percent.

However, he said he was certain that interest and exchange rates will be quite stable.

By the end of 2006, the Bank Indonesia Certificate (SBI) interest rate will be at the level of 9.75 percent and by the end of 2007, 9 percent.

This will rise to 10 percent in 2008.

The Rupiah exchange rate will be around 9,100 against the US Dollar.

M. Chatib Basri, University of Indonesia economist, agreed that the US economy affects Indonesia.

“But not as worse as what will happen in Singapore and Thailand,” he said.

He predicted that Indonesia’s economic growth next year will be better.

“Higher than in 2006, perhaps 5.8 percent to 6.3 percent,” he said.

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