The bomb attack on the JW Marriott hotel is unlikely in itself to derail the Indonesian economy but it clearly puts investor confidence -- especially among the foreign community -- to the test, analysts said.
For the moment, it appears that after an initial sharp negative reaction in the stock market and in the rupiah, which have since recovered, there is no reason to think that the economy will suffer permanent damage.
Should there be another significant attack in the near-term, however, involving heavy loss of life or major economic loss, or if it seems the authorities are making no progress in tracking down the bombers, then the investment community might review its risk assessment on Indonesia.
PHOTO: AFP
Analysts say that despite the blast, Indonesia is on track to achieve economic growth of 3.5 percent to 4.0 percent this year in line with government and private-sector forecasts.
"It will not send the economy into a tailspin. The fundamentals of some sectors -- infrastructure and mining and gas -- remain attractive," Raden Pardede, chief economist with the Danareksa Research Institute, told reporters.
At the same time, Pardede said the capital markets and tourism clearly reacted to the bombing, showing their sensitivity to bad news.
"It is very sensitive. Foreign investors are concerned about security," he said. "For another one to two months, foreign arrivals will suffer."
Pardede said foreign investors were already asking state-run gas company Perusahaan Gas Negara, which plans to issue bonds, for a higher interest rate.
"Over time investors will regain confidence but it also depends on how effective the government response is to contain repeat attacks," he said, adding that the impact could be cushioned by increased public spending.
Philip Wee, an economist with Singapore-based DBS Bank, said the shock from the bombing was proving to be temporary.
The stock exchange ended down 3.06 percent Tuesday on panic selling after the blast but closed higher on Wednesday and Thursday to recover virtually all of the losses. The rupiah initially fell but it too recovered later in the week.
"As long as the underlying focus of the market is the recovery, and the Indonesian government exhibits responsiveness in dealing with such acts, sell-offs are likely to remain a knee-jerk reaction, as in Bali," Wee said in a note on the attack.
Wee noted that the Marriott blast was less severe than the Bali bombings last October which killed 202 people and dealt a heavy blow to tourism. Those blasts were also blamed on Jemaah Islamiyah.
"The fundamentals in Indonesia today are also stronger, as evidenced by rising consumer confidence and retail sales," Wee said.
Wee said the central bank was keen to put monetary policy back on track towards the twin goals of maintaining monetary stability and stimulating economic growth.
NO RECIPROCITY: Taipei has called for cross-strait group travel to resume fully, but Beijing is only allowing people from its Fujian Province to travel to Matsu, the MAC said The Mainland Affairs Council (MAC) yesterday criticized an announcement by the Chinese Ministry of Culture and Tourism that it would lift a travel ban to Taiwan only for residents of China’s Fujian Province, saying that the policy does not meet the principles of reciprocity and openness. Chinese Deputy Minister of Culture and Tourism Rao Quan (饒權) yesterday morning told a delegation of Chinese Nationalist Party (KMT) lawmakers in a meeting in Beijing that the ministry would first allow Fujian residents to visit Lienchiang County (Matsu), adding that they would be able to travel to Taiwan proper directly once express ferry
STUMPED: KMT and TPP lawmakers approved a resolution to suspend the rate hike, which the government said was unavoidable in view of rising global energy costs The Ministry of Economic Affairs yesterday said it has a mandate to raise electricity prices as planned after the legislature passed a non-binding resolution along partisan lines to freeze rates. Chinese Nationalist Party (KMT) lawmakers proposed the resolution to suspend the price hike, which passed by a 59-50 vote. The Taiwan People’s Party (TPP) voted with the KMT. Legislative Speaker Han Kuo-yu (韓國瑜) of the KMT said the resolution is a mandate for the “immediate suspension of electricity price hikes” and for the Executive Yuan to review its energy policy and propose supplementary measures. A government-organized electricity price evaluation board in March
FAST RELEASE: The council lauded the developer for completing model testing in only four days and releasing a commercial version for use by academia and industry The National Science and Technology Council (NSTC) yesterday released the latest artificial intelligence (AI) language model in traditional Chinese embedded with Taiwanese cultural values. The council launched the Trustworthy AI Dialogue Engine (TAIDE) program in April last year to develop and train traditional Chinese-language models based on LLaMA, the open-source AI language model released by Meta. The program aims to tackle the information bias that is often present in international large-scale language models and take Taiwanese culture and values into consideration, it said. Llama 3-TAIDE-LX-8B-Chat-Alpha1, released yesterday, is the latest large language model in traditional Chinese. It was trained based on Meta’s Llama-3-8B
NOVEL METHODS: The PLA has adopted new approaches and recently conducted three combat readiness drills at night which included aircraft and ships, an official said Taiwan is monitoring China’s People’s Liberation Army (PLA) exercises for changes in their size or pattern as the nation prepares for president-elect William Lai’s (賴清德) inauguration on May 20, National Security Bureau (NSB) Director-General Tsai Ming-yen (蔡明彥) said yesterday. Tsai made the comment at a meeting of the Legislative Yuan’s Foreign Affairs and National Defense Committee, in response to Democratic Progressive Party (DPP) Legislator Wang Ting-yu’s (王定宇) questions. China continues to employ a carrot-and-stick approach, in which it applies pressure with “gray zone” tactics, while attempting to entice Taiwanese with perks, Tsai said. These actions aim to help Beijing look like it has