The smooth and peaceful general and presidential elections and the seamless transfer of power in 2004 has given rise to new optimism in Indonesia. The polls, which resulted in a full-fledged democratic government that would serve the people for a period of five years, also provided the harbinger of a rosy economic outlook of a nation that is on the move.

And the prospect of growth was emphasized by none other than the country’s new president Susilo Bambang Yudhoyono. “ Indonesia’s economic growth is likely to accelerate to 6.2 percent next year from a projected 6.0 percent this year,” Yudhoyono said in his annual budget speech.

The president was projecting this rate of growth on the basis of the nation’s new-found energy amid a stable environment. The freedom to invest and the opening up of opportunities by the government in many sector has allowed for this renewed optimism.

Investment in the country has grown by 15% during recent years . According to the data of the Central Statistics Agency (BPS) of Indonesia, Indonesia’s economy grew by 5.13 percent last year, and by 6.35 percent during this year’s first quarter. The government projected the economic growth of 6 percent in 2005.

Many people in the automotive industry are really happy these days with the handsome bonuses they have received after achieving or even surpassing sales targets and other performance indicators, thanks to cheaper bank loans that fuel demand and help keep the economy humming.

Indeed, the advances made by some economic indicators during 2004 should give reason for some people to celebrate.

Improving macroeconomic stability, as reflected in the relatively mild inflationary environment, has allowed the central bank to continue cutting interest rates, which as of the first week of December stood at a record low of 7.41 percent, a situation that in turn has allowed banks to provide cheaper consumer loans, fueling private consumption as households purchase durable goods such as electronic appliances, cell phones, motorcycles, and cars, and spend more money in the ever-increasing number of shopping malls and hypermarkets in major cities.

Car sales, for instance, are expected to set a new record of over 400,000 units, exceeding the industry association’s initial projection of 385,000 units, and marking the sector’s recovery from the devastating impact of the late 1990s economic crisis, which saw sales plummet to just 68,000 units in 1998.

Private consumption continues to be the main engine of economic growth, accounting for about 65 percent of gross domestic product (GDP), which in the third quarter expanded by a surprising 5.03 percent over the same period last year, beating the consensus among economists of around 4.7 percent. Almost all sectors in the economy registered higher growth, except for the mining and extractive industries sector, which declined by 5.96 percent year-on-year during the quarter due to a lack of investment amid various uncertainties in the sector.

The strong domestic demand is encouraging companies to increase output, and, coupled with a favorable macroeconomic climate and supportive global economic developments, prompting some to start making new investments.

The World Bank has acknowledged these early signs of increasing investment. “There are already signs of an investment recovery and the external economic environment is supportive,” it said in a recent Indonesian economic and social update.

These positive developments have prompted the World Bank to revise upward its growth estimate for this year to 4.9 percent from the initial forecast of 4.5 percent. In comparison, the government forecast the economy to grow by 4.8 percent this year.

According to the Central Statistics Agency (BPS), fixed capital formation, or fixed investment, has been growing faster during each of the past three quarters -- from 4.24 percent in the first quarter year-on-year to an annualized rate of 9.25 percent in the second quarter and 13.09 percent in the third quarter. Another indicator of increasing investment is the rise in imports of capital goods, which grew by more than 33 percent in the January-August period.

The encouraging signs in the investment sector seem to be reflected in a better employment picture. According to the World Bank report, unemployment declined from 8.5 percent in August 2003 to 7.4 percent in May 2004 with the labor participation rate increasing from 65.5 percent to 66.2 percent. “This is the first sign of improvement in the labor market, though validation of this trend will require more reliable annual data,” the Bank said.

The favorable weather this year has also buoyed up the economy, boosting production in the agriculture sector. It is estimated, for instance, that rice production will reach 34 million tons, compared to domestic consumption of around 31 million tons. This surplus marks a return to self-sufficiency in rice production after more than 20 years. Strong commodity prices, such as for crude palm oil, have also benefited the agribusiness sector, prompting some companies in the industry to revise upward their 2004 earnings estimates.

The improving trends in the country’s economic development have boosted sentiments on the local stock market, prompting investors to purchase shares in expectation of higher corporate profits.