ADB revises up growth forecasts for Indonesia<\/p>\n
JAKARTA (Reuters): The Asian Development Bank said on Tuesday
\nit had revised up its estimates for Indonesian economic growth
\nbut warned sustained recovery was critically dependent on
\neconomic reforms and a smooth political transition.<\/p>\n
\"Given the favorable developments in the macroeconomic
\nsituation during the first half of this year, the GDP growth
\nforecast for 1999 is being revised upward from zero to about two
\npercent,\" the ADB said in an updated economic outlook.<\/p>\n
It forecast four percent growth for 2000.<\/p>\n
Indonesia's latest letter of intent, agreed with the
\nInternational Monetary Fund, forecast GDP growth of 1.5 percent-
\n2.5 percent in the fiscal year to end-March. The government said
\nlast month Indonesia had the potential to grow two to four
\npercent in the current fiscal year and four to six percent the
\nfollowing year.<\/p>\n
But analysts polled by Reuters on average saw GDP dipping 0.3
\npercent this year, after contracting 13.7 percent in 1998, and
\ngrowing by 3.3 percent in 2000.<\/p>\n
The ADB said it was cutting its 1999 inflation forecast to
\n12.0 percent from 15 percent-20 percent, and predicted 10
\npercent inflation in 2000.<\/p>\n
\"Sustaining Indonesia's recovery will depend critically on
\ncontinued commitment to economic reforms and a smooth political
\ntransition period,\" the ADB said.<\/p>\n
In June, Indonesia held its first democratic parliamentary
\nelections in more than four decades. In November, the 500 members
\nof parliament plus 200 appointed officials will choose the
\ncountry's next president.<\/p>\n
The ADB said Indonesia's catastrophic economic crisis seemed
\nto have bottomed out, and there were \"signs of a recovery after
\nnearly two years of financial and economic turmoil\".<\/p>\n
It said the restructuring of Indonesia's state banks was
\ncrucial to the restoration of a functioning sector. The
\nIndonesian Bank Restructuring Agency (IBRA) would have to
\naccelerate the recovery of non-performing loans to keep the costs
\nof bank recapitalisation manageable, it said.<\/p>\n
The ADB said gains by the rupiah had encouraged more companies
\nto reach debt restructuring deals, but \"more rapid progress in
\nthis area and the effective implementation of the bankruptcy law
\nare necessary for handling corporate restructuring\".<\/p>\n
Indonesia also \"faces a daunting agenda of governance and
\nanticorruption reform, both in the short term and the medium
\nterm\", the ADB added. \"Sustained effort over a long period of
\ntime will be needed to address these deep-seated problems.\"<\/p>\n
Asia<\/p>\n
The ADB said on Tuesday it had raised its economic growth
\nforecasts for Asia, but it sounded notes of caution on the
\npolitical situation in Indonesia, Y2K compliance, and the slow
\npace of reforms.<\/p>\n
In its Asian Development Outlook Update, the Manila-based
\nlending agency said average economic growth in developing Asia,
\nwhich it defined as the region minus Japan, could reach 5.5
\npercent in 1999 and 2000.
\nI n April, the bank had forecast 4.4 percent growth in 1999 for
\nthe region and 5.1 percent growth in 2000.<\/p>\n
Globally, the ADB said there was a clear prospect the downturn
\nin 1998 that saw world GDP growth declining to 2.5 percent as
\ncompared to 4.2 percent in 1997 had been arrested.<\/p>\n
It said the rate of world GDP growth in 1999, supported by a
\nstronger-than-expected Asian recovery, was expected to move above
\n2.5 percent and to improve to about 3.5 percent in 2000.<\/p>\n
Among the countries in the region, South Korea is expected to
\npost the biggest growth in 1999 with GDP up eight percent on a
\nyear earlier. Taiwan, Singapore, Philippines and Thailand follow,
\nthe ADB said.<\/p>\n
China's growth, thought still high, is forecast to slow as the
\npump-priming of its economy through expansionary fiscal policy
\nstarts to lose its effectiveness, the bank said.<\/p>\n
From GDP growth of 7.8 percent in 1998, China's growth will
\nslow to 6.8 percent in 1999 and six percent in 2000, it said.<\/p>\n
South Asia, which escaped the wrath of the regional crisis
\nalong with China, is expected to post steady growth, with India's
\ngross domestic product seen posting year-on-year growth at seven
\npercent each in 1999 and 2000, higher than previously forecast.<\/p>\n
The ADB said inflationary pressures in the region would remain
\nsubdued due to improved agricultural sector performance and
\nexcess industrial capacity.<\/p>\n
Year-on-year inflation in developing Asia is seen at one
\npercent in 1999 and 3.1 percent in 2000, substantially below the
\nprevious forecasts of 3.7 percent in 1999 and 3.1 percent in
\n2000.<\/p>",
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"sponsor": "Okusi Associates",
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