RI could take 5 years to reach 1997 GDP level<\/p>\n
JAKARTA (JP): The Indonesian economy will continue to contract
\nand will bottom-out this year before the first green shoots of
\nthe recovery spring up next year, but pre-crisis growth rates
\nwill not be recovered until 2002, economists predict.<\/p>\n
Mari E. Pangestu, executive director of the Center for
\nStrategic and International Studies, forecast yesterday that the
\ncountry's gross domestic product (GDP) would shrink by between 10
\npercent and 20 percent this year.<\/p>\n
The industrial sector is expected to contract by 10 percent to
\n12 percent this year, the service sector by between seven percent
\nand 10 percent, while the agricultural sector is expected to grow
\nby 0.5 percent.<\/p>\n
She predicted that the economy would remain stagnant next year
\nwhile the country held a general election, and would register
\nannual growth of 2 percent in 2000 and 4 percent in 2001.<\/p>\n
\"So, we need at least five years to return to the level real
\nGDP was at in 1997,\" Mari said at a media conference on the
\neconomic outlook in the Pacific region held by the Pacific
\nEconomic Cooperation Council (PECC).<\/p>\n
Suhadi Mangkusubroto, a PECC economist, predicted that
\nIndonesia's economy would contract by 4.5 percent and inflation
\nwould rise to 32 percent during this year.<\/p>\n
However, he said the effects of major political and social
\nunrest or other destabilizing forces had not been included in the
\nanalysis and the forecasts were therefore no longer valid. The
\nforecasts were last revised in March when Soeharto was still in
\npower, he added.<\/p>\n
\"The situation now is much worse than a few months ago when
\nthe analysis was carried out. Therefore all of our forecasts are
\ninaccurate. For the time being, we should rely on the Central
\nBureau of Statistics projections for growth and inflation,\"
\nSuhadi said.<\/p>\n
The bureau predicted on Monday that the country's GDP would
\ncontract by 10.1 percent and inflation would soar to 80 to 85
\npercent this year.<\/p>\n
Raden Pardede, a senior economist with state-owned Danareksa
\nSekuritas, told The Jakarta Post yesterday that the bureau's
\nprojections for economic growth and inflation were still too
\noptimistic.<\/p>\n
\"I think our economy could contract by as much as 20 percent
\nthis year with inflation surpassing the 85 percent level
\nprojected by the bureau,\" he said.<\/p>\n
He said the economy would continue to contract because levels
\nof domestic and foreign investment were still declining.<\/p>\n
Domestic investment would continue to fall because of high
\ninterest rates and a decline in the savings rate to 18 percent
\nfrom 30 percent two years ago, he explained. Foreign investment
\nis continuing to avoid Indonesia because of the all-pervading
\nuncertainty in the country.<\/p>\n
Raden said inflation could surpass the 85 percent level
\nbecause the central bank would have to print more money,
\nemployers would face pressure to raise wages, their product
\nprices would continue to rise and the rupiah would further
\nweaken.<\/p>\n
Suhadi said the current situation resembled the dire economic
\ncircumstances of 1966\/1967 after the fall of the country's first
\npresident Sukarno.<\/p>\n
\"It is very similar to the situation in 1966\/67 when we could
\nnot finance our development programs. The government did not even
\nhave enough money to finance routine spending,\" Suhadi said.<\/p>\n
Luckily, he said, the government received soft loans from
\nfriendly countries to help see them through those difficult
\nyears.<\/p>\n
Suhadi suggested that the government work closely with the
\nInternational Monetary Fund (IMF) so that the agency would
\nquickly approve disbursement of loans to the country, which would
\nin turn encourage friendly countries to grant Indonesia further
\nbilateral aid.<\/p>\n
\"Only with foreign loans will the government be able to
\nfinance its operation, continue subsidies and stimulate the
\neconomy,\" he said.<\/p>\n
Miranda S. Goeltom, a Bank Indonesia director, agreed with
\nSuhadi's suggestion and said the government would use some of the
\nfunds available to help existing businesses to expand. (aly\/rid)<\/p>",
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