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Market ignores terrorist bombs
Wednesday, 22 July 2009
The Jakarta Post
The Indonesian financial market has apparently ignored the terrorist
bombing attacks that rocked the JW Marriott and Ritz Carlton hotels in
Jakarta on Friday, killing nine and injuring more than 50 people,
including foreigners.
It is also unlikely that Indonesia’s economic fundamentals will suffer a
severe loss. As was the case following the four previous major terrorist
attacks in Bali and
But anyway, international tourism has been weakening since the outbreak
of the global financial crisis and sharp economic downturn since last
July.
The financial market is usually the most vulnerable to uncertainty
because portfolio investors can easily move their money from one place
to another, so it is really encouraging that the market has remained
fairly calm.
But whether the financial market would continue to see the latest
bombings as an isolated incident after four years of peace without any
terrorist attacks, will depend on the speed and credibility with which
the government can resolve these terrorist threats.
We therefore agree with the expectations of most analysts that the
national economy will continue to grow at least by 4.5 percent
throughout this year on the back of robust private consumption, compared
to deep contractions in most other countries, including our neighbors
such as Singapore, Thailand and Malaysia.
The economy expanded by 4.4 percent in the first quarter, as domestic
consumption got a boost from massive spending on political campaigning
for the April legislative election. We believe the growth continued at
an annual pace of 4.5 percent in the second quarter, also partly due to
big political spending for the July 8 presidential election.
Indonesia’s US$454 billion economy may continue to expand at a similarly
respectable pace in the third quarter, as private consumption enjoys its
seasonal boost during the Islamic fasting month in August and Idul Fitri
celebrations in September.
The pace of growth may even accelerate in the last quarter on the back
of both private and government consumption because more than 60 percent
of the annual government investment budget usually is spent between
October and December.
However, this rosy outlook could evaporate if terrorists succeed in
staging another major bomb attack somewhere in the country within the
next few months, because such an incident would strike at the very
foundation of investment — security and safety.
Barring another major terrorist bomb attack within the next few months,
the economic outlook will be influenced more by the credibility of the
presidential election, the quality of the new Cabinet to be formed later
in October, and institutional capacity to speed up budget disbursement
and infrastructure development.
If the final results of the presidential election, scheduled to be
announced by the General Elections Commission later this week, are
perceived to be less credible or marred by too many major disputes, the
political stability may get a severe jolt at the big expense of economic
fundamentals.
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