ADB cuts RI growth forecast to 3.2%<\/p>\n
Moch. M. Kurniawan, The Jakarta Post, Jakarta<\/p>\n
Indonesia's predicted economic growth this year has been slashed
\nby about 25 per cent, the Asian Development Bank (ADB) said on
\nFriday.<\/p>\n
ADB revised its economic growth forecast for Indonesia this
\nyear from the 4.2 percent predicted in April to just 3.2 percent
\ndue to a global economic recession deepened by the Sept. 11
\nterrorist attacks on the U.S.<\/p>\n
ADB also cut its 2002 growth forecast from 4.5 percent to 3.9
\npercent.<\/p>\n
"Higher growth will be possible (next year) with significant
\nimprovements in political and security conditions," it said in
\nits latest outlook report on Asia.<\/p>\n
The government predicted the economy would grow by 3.5 percent
\nthis year, and 4 percent next year. The initial government
\nforecast for 2002 was 5 percent. Last year, the economy grew by a
\nhefty 4.8 percent mainly driven by strong export performances and
\nrising oil prices.<\/p>\n
Analysts have said that the world economic slump would
\nnegatively affect Indonesia's economy as exports fall.<\/p>\n
The cut in the economic forecast increases the threat of
\ngreater unemployment in the country of more than 200 million
\npeople already badly affected by years of economic crisis and
\npolitical upheaval.<\/p>\n
On Thursday, Indonesia's key donors, under the umbrella of the
\nConsultative Group on Indonesia (CGI), pledged some US$3.14
\nbillion in new loans to help finance the 2002 state budget plus
\n$586 million in grants and technical assistance.<\/p>\n
The government is scheduled to meet the Paris Club of creditor
\nnations in February next year to seek a rescheduling facility for
\nsome Rp 27 trillion (about $2.6 billion) in sovereign debt.<\/p>\n
Elsewhere, ADB said inflation this year might hit 11 percent
\ndue to a weaker rupiah, accommodative monetary policy, and hikes
\nin administered prices such as fuel and electricity.<\/p>\n
For 2002, inflation would stay at 9 percent although it would
\ngo beyond an earlier prediction of 6 percent, the Bank said.<\/p>\n
ADB said that despite renewed optimism following the election
\nof President Megawati Soekarnoputri late in July, the economy was
\nplagued with new uncertainty due to negative publicity resulting
\nfrom rising anti-U.S. protest at home in the wake of the U.S.-led
\nattacks on Afghanistan.<\/p>\n
The Bank said this would likely further reduce potential
\ninvestment inflows "and perhaps exacerbate capital flight from
\nthe country."<\/p>\n
ADB said the government must pursue policies to stabilize the
\neconomy and relaunch tough reforms that are needed to stimulate
\nthe economy.<\/p>\n
The Bank also warned that the government should speed up asset
\nsales and privatization.<\/p>\n
"Failure to meet the privatization and asset sales targets
\nwill jeopardize recovery prospects and further restrict
\ndevelopment investment," ADB said.<\/p>\n
On the economic outlook for other countries in the region, ADB
\nsaid that Singapore, Taiwan, South Korea, and Hong Kong, had seen
\ntheir economies suffer serious setbacks due to the impact of the
\nworld slump.<\/p>\n
These countries were expected to undergo an economic
\ncontraction in 2001, except for Korea which was forecast to
\neke out 2 percent growth after expanding by 8.8 percent in 2000.<\/p>\n
China's forecast remains unchanged from ADB's April report at
\n7.3 percent this year, the region's highest growth forecast.<\/p>",
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