RI economy might cool down next year<\/p>\n
JAKARTA (JP): Indonesia's overheated economy and high
\ninflation rate this year may force 1996 to become a year of
\nconsolidation and cooling down, an economist predicts.<\/p>\n
Rizal Ramli, the managing director of the Econit economic
\nresearch group, said on Saturday that signs of overheating this
\nyear can be seen from Indonesia's current account deficit, which
\nmay reach US$6.5 billion, more than double last year's US$3.1
\nbillion deficit.<\/p>\n
Inflation this year, he said, will also likely reach a high 10
\npercent.<\/p>\n
Rizal said that consolidations, both on the macro and
\ncorporate levels, were needed to reduce the negative impacts of
\noverheating and excessive expansions occurring this year.<\/p>\n
\"Assuming that the overheating will continue into next year,
\nthe government must apply conservative macro economic policies to
\nprevent speculative attacks on Indonesia,\" he told reporters
\nwhile presenting Econit's 1996 economic outlook.<\/p>\n
Rizal said that if Indonesia could reduce the overheating next
\nyear, long and medium-term prospects for 1997-1998 could be \"very
\nfavorable\" and lead to an economic boom.<\/p>\n
\"But such a boom won't happen if our current account deficit
\ncontinues to be high. This is an important risk factor for 1996,\"
\nhe said.<\/p>\n
Econit estimated this year's economic growth rate at 7.5
\npercent, up from 7.3 percent last year. Next year, however,
\nconsolidations are expected to lower the growth to 7.3 percent
\nagain.<\/p>\n
\"Although this may not have a significant impact on
\nIndonesia's economy, several sectors, which can grow faster in
\nsuch a climate, may feel the effect more than others,\" he said.<\/p>\n
Rizal said several sectors will have to consolidate and review
\ntheir strategies next year due to changes in government policies
\nand over-expansive actions taken this year.<\/p>\n
The impact of rapid investment growth during the 1994-1996
\nperiod, especially from foreign investors, will be felt in 1997-
\n1998, Rizal said.<\/p>\n
\"Most of the investment during those years have been in areas
\nwhich are oriented largely to the domestic market, thereby
\nrequiring a longer gestation period to bring in revenues,\" he
\nsaid.<\/p>\n
Increasing investments, he said, would lead to a rise in
\nimports and, consequently, give a boost to the country's current
\naccount deficit.<\/p>\n
Among the factors which will help to ease the consolidations
\nnext year are increasing portfolio and direct foreign investment
\nflows, the depreciation of the yen to the dollar and more
\ngovernment deregulations.<\/p>\n
Rizal said the effectiveness in cutting back inflation rates
\nnext year would largely depend on the timing of the forthcoming
\nderegulation packages and on how much the measures might raise
\nthe prices of goods and services.<\/p>\n
\"If the government issues deregulatory measures about May, it
\nwon't be much use because its implementation can't have a direct
\neffect,\" he said.<\/p>\n
Econit predicted the government would gradually raise the
\nprices of oil and gas and public utilities -- such as water,
\nelectricity, public transportation and toll road fares -- next
\nyear.<\/p>\n
Rizal said the domestic political climate would also determine
\nthe country's regulatory and business environment.<\/p>\n
\"Political anxiety, which started this year, will likely
\ncontinue next year. Changing tactics and strategies whenever
\nnecessary, which is typically Indonesian, will take place to
\nstrengthen political leverages for the upcoming general election
\nin 1997,\" he said. (pwn)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ri-economy-might-cool-down-next-year-1447893297",
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