Indonesia economy grows healthily into '95<\/p>\n
JAKARTA (JP): Two prominent economists said Saturday that
\nIndonesia's economy, spurred by a greater inflow of investments
\nand stronger growth in the agricultural, manufacturing, mining
\nand construction sectors, is likely to grow faster in 1995.<\/p>\n
\"With the rapid expansion in investments and the industrial
\nsector, we are optimistic that the country's Gross Domestic
\nProduct (GDP) will grow by over seven percent next year,\"
\nMohammad Arsjad Anwar, a lecturer at the economics faculty of
\nthe University of Indonesia, told a one-day seminar here on the
\n1995 economic and advertising business prospect.<\/p>\n
However, Dorodjatun Kuntjoro-Jakti, also a lecturer at the
\nuniversity, warned in an internal discussion at The Jakarta Post
\non Saturday that Indonesia's inflation rate will remain high
\nnext year, while interest rates will increase.<\/p>\n
Arsjad, who is also an assistant to the chairman of the
\nNational Development Planning Board, said that the country's GDP
\nis estimated to grow by 7.5 percent next year, as compared to an
\nestimate of seven percent this year and only 6.5 percent last
\nyear.<\/p>\n
Dorodjatun was also optimistic, saying that the country's GDP may
\ngrow by 7.2 percent in 1995, as compared to an estimated 6.8
\npercent this year.<\/p>\n
The bullish growth in the country's economy will be supported by
\na greater inflow of foreign investments as a result of the
\nincreasing current account surpluses in Japan, western Europe and
\nnewly industrialized countries, Arsjad said.<\/p>\n
According to the Investment Coordinating Board, commitments of
\nforeign investments approved by the government during the first
\nnine and a half months of this year alone reached $23.1 billion,
\nalmost three times the $8.1 billion approved in 1993.<\/p>\n
Dorodjatun said next year's high economic growth will also be
\nsupported by increasing oil prices on the world market.<\/p>\n
Imports<\/p>\n
\"In a related development, the country's imports of capital goods
\nposted a sharp increase this year, clearly justifying the
\nacceleration of the investment sector,\" Arsjad said.<\/p>\n
During the first eight months of this year, imports of capital
\ngoods rose 8.4 percent over the same period of last year.<\/p>\n
But, according to Dorodjatun, the implementation of investment
\nprojects in 1995 will not be as high as the levels committed by
\ntheir investors because there will likely be capital shortages in
\nindustrial countries, the major source of Indonesia's foreign
\ninvestments.<\/p>\n
\"The shortage of capital in industrial countries is indicated by
\nthe widening gap between interest rates on long and short term
\nloans,\" he said.<\/p>\n
Arsjad said that the agricultural sector, which has grown slowly
\nover the past 10 years, expanded robustly in the first two quarters
\nof this year.<\/p>\n
\"Prices of our rubber and coffee on the international market, for
\nexample, have sharply increased this year,\" he said.<\/p>\n
Arsjad said the bullish growth in the manufacturing and mining
\nsectors next year will be spurred by stronger domestic demand as a
\nconsequence of the planned reduction in the income tax rates
\nbeginning next year and the expected rise in the government-set
\nminimum wages for workers.<\/p>\n
He said that the expansion of banking credits will become a key
\nfactor to the acceleration of growth in the construction industry.<\/p>\n
Arsjad assured participants of the seminar Saturday that the
\nbullish growth in some industrial sectors will push up exports.<\/p>\n
He did not unveil the growth, but a prominent senior economist,
\nSumitro Djojohadikusumo, predicted that the country's exports are
\nlikely to increase to $45 billion next year from an estimated $40
\nbillion this year.<\/p>\n
Speaking at an annual meeting of the Civil Servants Cooperatives
\nOrganization on Thursday Sumitro predicted that the country's
\nexports will further increase to $70 billion in 1998.<\/p>\n
Dorodjatun said the increasing exports will also be supported by
\nhigh economic growth in industrial countries, the major
\ndestinations of Indonesia's exports.<\/p>\n
The economy in Japan, for example, is likely to increase from an
\nannual rate of 0.8 percent in the third quarter of this year to
\nalmost two percent next year, while the U.S. economy may continue
\nto grow by more than 2.6 percent next year, he said.<\/p>\n
Inflation<\/p>\n
He projected that Indonesia's inflation will remain high next
\nyear. \"The inflation rate may reach eight percent next year,\" he
\nsaid.<\/p>\n
Inflation reached 8.72 percent during the first 11 months of this
\nyear, as compared to 9.24 percent last year.<\/p>\n
Dorodjatun said the high inflation, coupled by increasing
\ninterest rates in the United States, will force Indonesian banks to
\nraise their interest rates next year, thereby slightly affecting
\ndemand for property and durables.<\/p>\n
Prime interest rates may rise to 20 percent per annum next year
\nfrom 19 percent this year, he added.<\/p>\n
The high interest rates and inflation and the increasing market
\ncompetition will also reduce the profits of companies, he said,
\nadding that they may also encourage companies to merge for
\nendurance.<\/p>\n
\"But the increasing interest rates will encourage the rapid
\nexpansion of the country's capital market, a source of cheap
\nmoney,\" he said.(fhp\/riz)<\/p>",
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