Indonesia's economic growth this year may fall short of the IMF's 3.5 percent forecast because of the spread of a deadly virus and weakening consumer confidence, the fund's country director said.
The virus outbreak's "implications for the economy and signs of weaker domestic consumer confidence need to be assessed," David Nellor said in an interview, referring to severe acute respiratory syndrome, or SARS, that has taken at least 119 lives worldwide, mostly in Asia.
The IMF last week said growth in Indonesia, southeast Asia's biggest economy, may slow to 3.5 percent from last year's 3.7 percent. That's a third short of the pace international donors say is needed to create jobs for 40 million unemployed. Nellor said slowing inflation might give Jakarta room to spur growth by trimming interest rates.
"The stability of the rupiah and the significant decline in inflation has enabled the central bank to lower interest rates," Nellor said. "The prospects for further easing need to be assessed on the basis of future inflation performance."
Indonesia reported its first case of SARS on Friday. The disease, which has curbed travel in Asia and threatens to trim growth in Singapore and Hong Kong, comes at a bad time for Indonesia.
Consumer confidence fell to a record in February as Indonesians grew concerned about jobs and shrinking disposable income, Danareksa Research Institute said, after the government raised fuel and electricity rates. Consumer spending accounts for three-quarters of Indonesia's economy.
While it is too early to say for certain that weakening consumer confidence will reduce spending, "we need to look at this," Nellor said.
Foreign investment approvals in 2002 shrank 35 percent to nine-year lows, and a terrorist attack on Bali island in October that killed at least 202 people has scared away tourists.
Tourism earned US$4.3 billion in foreign currency last year, a fifth less than in 2001.
Nellor said an export recovery -- non-oil exports rose 7.1 percent in February from a year ago -- may help growth.
"With some improvement in the world economy, we hope that exports, which have shown signs of recovery, will contribute to growth," he said.
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