ESCAP gives optimistic outlook for Indonesia<\/p>\n
JAKARTA (JP): The Economic and Social Commission for Asia and
\nthe Pacific (ESCAP) has given Indonesia a relatively optimistic
\neconomic outlook for this year.<\/p>\n
ESCAP, a United Nations agency, projected yesterday the
\ncountry's economic growth would be minus 1.5 percent during the
\n1998\/1999 fiscal year, far better than the government's
\nprojection of minus 4 percent.<\/p>\n
The agency also estimated in its report that the country's
\ninflation rate would be 22.5 percent for the fiscal year, much
\nlower than the government's projection of 47 percent.<\/p>\n
It said the financial and currency crisis, which started in
\nmid-1997 in Thailand, had deepened and engulfed Indonesia over
\nthe past few months, causing the country's economic outlook to
\nremain gloomy in coming years.<\/p>\n
It attributed Indonesia's bleak economic outlook to a
\npersistent fall in the rupiah's value against the U.S. dollar,
\ndwindling foreign investment inflows, the halt of credit inflows,
\na mounting inflation rate, high interest rates and low market
\nconfidence in the country.<\/p>\n
"The domestic cash flow crisis deepened and debt servicing
\nobligations on foreign currency denominated debts rose steeply as
\nthe value of the rupiah declined rapidly," ESCAP said in the
\nreport.<\/p>\n
The rupiah has fallen 70 percent in value against the U.S.
\ndollar to about Rp 8,500 now, compared to a pre-crisis value of
\nRp 2,450 last July.<\/p>\n
"The economic growth will be affected by the need to maintain
\nhigh interest rates to stabilize the exchange rates," the report
\nsaid.<\/p>\n
"Consumption and investment are both affected and conditions
\nwere aggravated by the drought and haze enveloping a large part
\nof Indonesia in September and October last year."<\/p>\n
The report said Indonesia was expected to suffer further
\nbecause of the adverse impacts of the El Nio phenomenon on
\nagricultural production this year.<\/p>\n
"Even the most optimistic forecasts do not see Southeast Asian
\neconomies, including Indonesia, regaining the dynamism achieved
\nin the first half of 1990 until after 1999," the report said.<\/p>\n
The report said that one of the significant weaknesses of the
\nregion's economy lay in widening current account deficits.<\/p>\n
The current account deficits were funded by short-term loans
\nwhich were heavily invested in speculative property sectors.<\/p>\n
The bubble burst when the oversupply in the property sectors
\nsent property values falling, causing a snowball effect leaving
\nbanks saddled with bad loans.<\/p>\n
"As a result, this has triggered the collapse of the stock
\nmarket and a crisis of confidence throughout the region," the
\nreport said.<\/p>\n
Indonesian economist Anwar Nasution, who introduced the report
\nto the media here in Jakarta, said yesterday that most short-term
\nloans owed by the country's corporate sector were used to finance
\nthe development of non-trade sectors such as property, power and
\ntoll roads in which politically well-connected business groups
\nhad significant stakes.<\/p>\n
"The use of foreign loans to finance those non-trade sectors
\nlike property projects and toll roads have caused us trouble
\nnow," Anwar said. (aly)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/escap-gives-optimistic-outlook-for-indonesia-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}