RI economic recovery shaky: WB<\/p>\n
JAKARTA (JP): The World Bank predicted on Wednesday that
\nIndonesia's economy would shrink a minor 1 percent in the
\n1999\/2000 fiscal year before returning to modest growth of 3
\npercent in the following year, but only if the government sticks
\nto its reform program.<\/p>\n
If the government slows down on pushing through reform and the
\nglobal situation also worsens, Indonesia's gross domestic product
\nwould dip by 3 percent next fiscal year, beginning in April, and
\nremain stagnant in the following year.<\/p>\n
\"Indonesia's prospects are subject to a wider-than-usual band
\nof uncertainty,\" the bank said in its country assistance strategy
\nprogress report.<\/p>\n
\"The point at which the economy will bottom out and start
\ngrowing again is hard to predict.\"<\/p>\n
Part of the uncertainty, the bank said, lay in Indonesia's
\nmain markets in East Asia and also in continued political
\nuncertainty at home.<\/p>\n
A reversal in the world equity market and a deepening
\nrecession in Japan -- Indonesia's main trading partner and source
\nof investment -- would seriously affect the country's economic
\nrecovery, it added.<\/p>\n
The report warned the country's recession would be prolonged
\nand recovery postponed if domestic political events took a turn
\nfor the worse.<\/p>\n
\"Nevertheless, if political events go smoothly and the
\ngovernment implements the reform program speedily and
\nconsistently, the economy will bottom out in the 2000\/2001 fiscal
\nyear.\"<\/p>\n
The turnaround in growth is expected to come from agriculture
\n-- partly a rebound from last year's drought -- mining and
\nexports of labor intensive manufacturing.<\/p>\n
The bank predicted inflation should moderate to 20 percent
\nnext fiscal year and 10 percent the following year, from almost
\n80 percent in the 1998 calendar year.<\/p>\n
The government should continue with its tight monetary policy
\nto reduce inflation and stabilize the rupiah, the bank said.<\/p>\n
It forecast Indonesia would continue enjoying a trade surplus
\nof 3.2 percent of the GDP next fiscal year and 2.4 percent the
\nfollowing year. The surplus is projected to stand at 4.6 percent
\nthis fiscal year.<\/p>\n
Domestic demand contraction and the rupiah's real depreciation
\nhelped swing the current account into surplus, the bank said.<\/p>\n
In the fiscal sector, the bank said, Indonesia should continue
\nwith its expansionary fiscal policy to stimulate demand.<\/p>\n
Consequently, the budget deficit will remain high, at 4.8
\npercent of GDP in 1999\/2000 and 3.5 percent the following year,
\ncompared to 4.7 percent in the current year.<\/p>\n
This will result in increasing external financing needs for
\nthe country.<\/p>\n
Indonesia, the bank said, would need about $15 billion in the
\n1998\/1999 fiscal year and in each of the next four years for
\namortization payments of both public and private external debt.<\/p>\n
The bank has committed to providing $4.9 billion in the three-
\nyear period 1998 through 2000, including $3.2 billion in
\nadjustment lending to help finance government budget needs and
\n$1.7 billion in investment lending.<\/p>\n
With the new loans, Indonesia is projected to near the bank's
\nconcentration limit of $13.5 billion for a single large borrower
\nfor the 2000\/2002 fiscal years. It would limit the scope for
\nadditional lending in the future to about $1.2 to $1.3 billion a
\nyear.<\/p>\n
The bank noted the government of President B.J. Habibie
\ncontinued to show its commitment to reform. The government has
\nattained \"important achievements\" in import-export policy
\nreforms, domestic market deregulation and investment policies
\nchanges and improved forest management regulations.<\/p>\n
It noted the government has also initiated several other
\nmeasures, including anticorruption actions, civil service
\nreforms, fiscal decentralization and judicial reforms.<\/p>\n
However, it warned the government could become increasingly
\nfocused on short-term measures before the June 7 general
\nelection.<\/p>\n
\"There is a danger, of course, that these initiatives may be
\nmotivated by short-term political considerations to the detriment
\nof longer-term development objectives, and they will require
\nclose monitoring and intensive, constructive involvement by the
\nbank and others,\" it said.<\/p>\n
The election is touted as the first free and fair election in
\nthree decades.<\/p>\n
The poll and presidential election in November could fuel
\nuncertainty and stall government decision-making, the bank said.
\n(rei\/rid)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ri-economic-recovery-shaky-wb-1447893297",
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