RI's growth to fall 5 percent next year: Indef<\/p>\n
JAKARTA (JP): The country's economy will contract by a further
\n5 percent next year barring any major political upheaval,
\nindependent research agency Institute for Development and Finance
\n(Indef) predicts.<\/p>\n
Indef's Gross Domestic Growth (GDP) forecast for 1999 is worse
\nthan the government's economic outlook in which the economy --
\nwhich is estimated to shrink 13.5 percent this year -- would grow
\nat least 1 percent.<\/p>\n
Indef director Faisal Basri said on Monday there would be a
\nslight recovery next year but GDP growth would remain in
\nnegative territory.<\/p>\n
"Next year's growth will be better than this year as long as
\nthere are no more shocking episodes," Faisal said on the
\nsidelines of a discussion organized by the agency.<\/p>\n
Controversial political issues such as a delay in the general
\nelection, which is scheduled in May, would have fatal
\nconsequences for the country's economic prospects and would make
\nit gloomier than it already is, warned Faisal, who is also the
\nsecretary-general of the newly established National Mandate
\nParty.<\/p>\n
The Asian Development Bank lowered last week its forecast on
\nIndonesia's growth to minus 16 percent this year and minus 3
\npercent next year, from respectively minus 3 percent and 1
\npercent.<\/p>\n
Faisal said fundamental indicators, such as high inflation and
\ninterest rates, and the high money supply indicated that there
\nhad not been a significant recovery in the economy.<\/p>\n
The real sector is still sluggish because investors are taking
\na wait-and-see stance, and lack of confidence had halted the flow
\nof foreign capital to the economy, he said.<\/p>\n
Inflation<\/p>\n
Faisal also estimated that inflation would be below 20 percent
\nbut higher than 10 percent next year, a drop from the expected 80
\npercent inflation for this year.<\/p>\n
The government had earlier projected that inflation would fall
\nto about 10 percent for next year.<\/p>\n
Inflation would be caused by the increase in the money supply
\nbecause of the increase in the subsidies given by the government,
\nFaisal said.<\/p>\n
Faisal said he was concerned that the government would likely
\nchurn out more subsidies on food-related commodities which were
\nnot economically sound in order to contain political and social
\nconflicts, which are getting more intense.<\/p>\n
"Rising prices of commodities and services will pressure the
\ngovernment to subsidize it," he said, citing electricity, whose
\nrate rise had recently been delayed.<\/p>\n
"In the future, the potential for political instability will
\nget bigger while raising the prices of essentials would be too
\nrisky."<\/p>\n
In addition to increasing the subsidies, the government will
\nextend its budget to finance social safety net programs to cater
\nto millions of Indonesians who have lost their jobs in the
\nprolonged economic crisis.<\/p>\n
Subsidies and social safety net programs could total some Rp
\n100 trillion (US$13.33 billion) in the budget, he said.<\/p>\n
The government will also allocate at least Rp 80 trillion in
\nsovereign loans and interest repayment, and about Rp 50 trillion
\nfor banking restructuring in next year's state budget.<\/p>\n
"We therefore expect a significant rise in expenditure in the
\nnext fiscal year's State Budget," he said.<\/p>\n
At the same time, the lower international price of crude oil
\nand the strengthening of the rupiah against the dollar will cause
\na potential drop in the state income from foreign exchange
\nearnings.<\/p>\n
Lower foreign exchange receipts would therefore widen the
\ndeficit in the State Budget for the 1999 to 2000 fiscal year of
\nat least 10 percent, from the estimated 6 percent for the current
\nfiscal year.<\/p>\n
He conceded that subsidies were important to create a
\nconducive condition and eliminate sharp social tension and
\nconflicts within society, but cautioned that measures must be
\neconomically sound.<\/p>\n
Faisal also predicted that the banking sector would begin
\nshowing signs of recovery in the middle of next year.<\/p>\n
"They can start working toward normalcy, but it doesn't mean
\nthey are already normal."<\/p>\n
Recovery in the banking sector would take longer than three
\nyears, but it could start in 2000 if restructuring was expedited,
\nhe said.<\/p>\n
Faisal said the exchange rate of the rupiah against the U.S.
\ndollar would likely stay at its current level of 7,000 to 7,500
\nnext year. The precrisis level in August last year was about
\n2,500 to the dollar. (das)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ris-growth-to-fall-5-percent-next-year-indef-1447893297",
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