Blasts not to damage Indonesian economy

JAKARTA: Indonesia's economy and financial markets are likely to be unscathed by the suicide blasts that hit Jakarta hotels last week, although its tourism industry will suffer, analysts said Monday.

Share prices and the rupiah currency were resilient Friday despite the bombs which tore through the JW Marriott and Ritz-Carlton, killing up to nine people including four foreigners attending a business breakfast.

"The sentiment generally is quite positive on Indonesia," said James McCormack, head of Asian sovereign ratings at Fitch Ratings in Hong Kong, pointing to strong public finances and balance of payments.

"Our expectation is that there will probably not be a big change in investors' views on Indonesia and the risk environment there," he said, adding that the outlook would change if there were further bombings.

"We've seen these kinds of things in Mumbai and other cities, and without a follow-up, business people get back to normal fairly quickly."

Financial markets were closed on Monday for a public holiday and trading will resume on Tuesday.

Indonesia has emerged from years of political crisis to become an engine of growth in Asia and an unlikely beacon of democracy in an increasingly unstable region.

The stock market has already soared almost 50 percent this year and the economy is forecast to post growth of more than four percent in 2009, third only to China and India of the G20 group of rich and developing countries.

Investors were also heartened by the recent re-election of President Susilo Bambang Yudhoyono, who has been praised for his sound economic management and anti-corruption efforts.

Yudhoyono said in the immediate aftermath of the attacks that they "will have wide effects on our economy, trade, tourism and image in the eyes of the world".

While observers were more confident about the wider economy, there are concerns for the tourism industry, particularly on the resort island of Bali which is still recovering from 2002 blasts that killed over 200 people.

"The impact of bombings is getting much less. The last time we had a negative impact from a bombing on the Indonesian financial markets was the Bali bombing of 2002," said Chatib Basri, a University of Indonesia economist.

Blasts in following years on the JW Marriott and the Australian embassy in Jakarta had only a "very mild" effect.

"There will be an impact on the Indonesian economy but it will be on tourism. If you look at hotels the occupancy rates are falling," he added.

Australia, which lost three of its citizens in last Friday's attacks, on Sunday issued an updated travel advisory that said there was a possibility of further attacks and urged citizens to reconsider travelling to the country.

Australian media reports have suggested that the Marriott bomber deliberately targeted the weekly business breakfast which was attended by some of Jakarta's most influential foreigners.

The Sydney Morning Herald said that the Marriott bomber, caught on security cameras entering the dining area with a backpack on his chest and dragging a suitcase, talked his way into the private meeting room.

The deaths of the prominent figures, and the bombers' success in breaching security at the two hotels -- among the best-guarded buildings in the country -- has shocked Jakarta's business and expatriate community.