RI growth will remain strong in 1995: Econit<\/p>\n
JAKARTA (JP): The high inflation rate over the past few
\nmonths, the appreciation of the yen and the government's slow
\nresponse to new economic developments may affect Indonesia's
\neconomy in the short term, an economic think-tank said yesterday.<\/p>\n
However, the Econit Advisory Group in Economics, Industry and
\nTrade, said in its mid-year review that in the long term,
\nIndonesia's economy, bar any unexpected social or political
\ninstability, will not face serious problems in reaching an annual
\ngrowth rate of six or seven percent per annum because the current
\nfundamental factors in the economy are healthy and well managed.<\/p>\n
Laksamana Sukardi, an associate director of Econit, said that
\nthe economy might grow more than seven percent if the government
\nmanages the macro-economy better.<\/p>\n
He said that Econit has downgraded its assessment on
\nIndonesia's short-term economy, as compared to its assessment
\nlast November, after the announcement of the high inflation rate
\nin the first few months of this year, the appreciation of the yen
\nand the slow response of the government towards economic
\ndevelopments.<\/p>\n
Econit's economic outlook for 1995, published last November,
\nsaid that the Indonesian economy should be very healthy this
\nyear.<\/p>\n
Poor coordination<\/p>\n
Laksamana said the government's slow response towards economic
\ndevelopments indicates poor coordination among its institutions,
\nparticularly those related to the management of economic sectors,
\nsuch as trade and industry.<\/p>\n
He said such a slow response has caused Indonesia to lose
\nexport opportunities offered by very favorable international
\nfactors early this year.<\/p>\n
\"The May 23 deregulation package was introduced too late to
\nrespond to the opportunities,\" he added.<\/p>\n
Moreover, the deregulation did not touch sectors vital to the
\npublic and will not contribute much to support economic
\ndevelopment, he added.<\/p>\n
He said the inflation rate in the last few months was too
\nhigh.<\/p>\n
According to the Central Bureau of Statistics, the inflation
\nrate during the first four months of this year alone reached 4.73
\npercent, only slightly below the five percent targeted by the
\ngovernment for the whole year.<\/p>\n
Laksamana said that the high inflation rate was mainly caused
\nby substantial increases in the prices of commodities of which
\nthe domestic trade is regulated by the government, such as
\ncement, wheat flour, sugar, cooking oil and paper, due to their
\noligopolistic trading.<\/p>\n
\"It's ironical that the prices of the regulated commodities on
\nthe domestic market are far higher than international price
\nlevels,\" he said.<\/p>\n
The domestic retail price of sugar, for instance, was recorded
\nlast month at US$733 (Rp 1.63 million) per ton, 145 percent
\nhigher than the international price of only $299, while the
\ndomestic retail price of wheat flour was $378 per ton, 47 percent
\nhigher than the international price of $256, he said.<\/p>\n
Laksamana said the recent increase in banking deposit rates to
\nabout 14.5 percent per annum has raised lending rates to a range
\nof between 21 percent and 23 percent per annum.<\/p>\n
\"If the lending rates increase further to 25 percent, many
\ncompanies will face cash-flow difficulties and many debts may go
\nsour,\" he said.<\/p>\n
Econit estimates interest rates will most likely further grow
\nby between one and two percent by the end of this year due to the
\nhigh inflation rate, the funding gap in the banking sector and
\nthe expectation of steep rupiah depreciation. (32)<\/p>",
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