The impact of the Bali bombing was not as bad as the market thought Fauzi Ichsan, Standard Chartered Bank

Economists had feared that last October's Bali bombings - which killed nearly 200 people - could hurt consumption, a key factor behind growth in the world's fourth-most populous country.

But the figures showed last year's growth was largely driven by local consumer spending, which rose by 4.7%.

"It is rather good news because (it) is actually above the market prediction," said Fauzi Ichsan, an economist at Standard Chartered Bank

"(We) predicted around 3.5%.

"Basically, the impact of the Bali bombing was not as bad as the market thought."

Economy on track

Raden Pardede, chief economist at Danareksa Securities, said: "The 2002 figures show the economy remains largely on track to achieve better growth this year.

"We forecast growth at 3.7% in 2003 which would continue to be driven by consumption."

Although better than expected, the growth figure is still far below what is needed to overcome huge debt and chronic unemployment problems.

The World Bank said at the end of last year that Indonesia should be aiming at a growth rate of 5-6% if it was serious about reducing its debts.

Indonesia's official statistics bureau said economic output., or GDP, in the final three months of the year grew 3.8%, compared with the same period a year earlier.

But GDP fell 2.6% compared with the July to September quarter.

The statistics bureau said the slowdown in the growth during the fourth quarter was due to a crop failure in the farming sector.