Stability of RI's macro-economy uncertain: Econit<\/p>\n
JAKARTA (JP): Uncertainty over the stability of the Indonesian
\nmacro-economy is likely to remain a major issue until the end of
\nyear due to a lack of effective measures taken by the government
\nto reduce the country's current account deficit.<\/p>\n
Econit's Economic Update, a mid-year review issued yesterday
\nby Indonesian consultants the Econit Advisory Group, said that
\nmacro-economic stability, which has been clouded by the current
\naccount deficit since last year, is now getting even worse with
\nthe government's inconsistent policies aimed at cooling down the
\neconomy and promoting investment and trade.<\/p>\n
Econit said in the review that the current account deficit,
\nwhich is estimated to reach US$7.5 billion this year, will
\ncontinue to threaten macro-economic stability.<\/p>\n
The review said that 1996 should be a year of consolidation
\nboth in the macro-economic sphere and the corporate sector, in a
\nbid to cool the economy and to anticipate a foreseeable boom next
\nyear.<\/p>\n
\"It will only happen if the monetary policies are in line with
\nfiscal policies, meaning that both should be contractive.\"<\/p>\n
\"Several monetary policies have been able to cool down the
\neconomy. Some deregulation packages in the real (trade and
\nproduction) sector, however, fail to support the consolidation
\nprocess,\" the review said.<\/p>\n
\"Ironically, the government policies in the real sector, such
\nas the national car program, are contradictory and tend to widen
\nthe current account deficit.\"<\/p>\n
Econit acknowledged that monetary policies, such as the
\nincrease of the capital adequacy ratio and reserve requirement of
\ncommercial banks, which came into effect last February, as well
\nas the tightening of multi-finance companies' credit expansion,
\nhave helped curb credit expansion and increase banks' liquidity
\nsince early this year.<\/p>\n
But the government's 1996\/7 budget plan is not counteractive
\nand not supportive of the consolidation process.<\/p>\n
The review said that the deregulation packages issued by the
\ngovernment in January and June have attracted more foreign
\ninvestments. Most of the investments do not go to export-oriented
\nprojects as expected. it said.<\/p>\n
The proportion of export-oriented projects among foreign
\ninvestments declined from 64 percent in 1994 to 57 percent in
\n1995. During the first quarter of this year, the percentage was
\nrecorded at only 43 percent -- the lowest figure in the last five
\nyears -- as compared to 86 percent in the same period of 1994.<\/p>\n
\"The upward trend of foreign investments aimed at the sales of
\nproducts on the domestic market will widen the current account
\ndeficit in the future,\" the review stated.<\/p>\n
The review also noted that the realization of both domestic
\nand foreign investment plans is very disappointing this year
\ndespite a dramatic increase in the amount of investments
\napproved.<\/p>\n
During the period of Jan.1 to May 15, domestic investment
\nplans rose 145 percent to Rp 59 trillion ($25 billion) over the
\nsame period of last year, while foreign investment plans
\nincreased by 14 percent to $18 billion.<\/p>\n
The realization of domestic investment plans in the first 4.5
\nmonths of this year, however, was estimated at less than Rp 20
\ntrillion, while the realization of foreign investment plans was
\nless than $5 billion.<\/p>\n
The low level of realization indicates investors' suspicion of
\nthe investment climate in the country due to several
\ndiscriminative policies as well as inefficient bureaucratic
\nprocedures.<\/p>\n
Econit also pointed out that the increase in the amount of
\ndomestic investments is not matched by an increase in the number
\nof investors, as reflected by the number of projects, which
\nincreased by only 13 percent for the first 4.5 months of this
\nyear.<\/p>\n
It suggests an economic structure which is dominated by a few
\ngroups.<\/p>\n
On portfolio investment, Econit estimated that the Jakarta
\nStock Exchange will be stagnant in the second half of this year
\nfor several reasons. Most stocks, for example, are now fully-
\nvalued, meaning that investors can no longer make capital gains.<\/p>\n
The widening current account deficit will also increase
\ninvestment risks from the macro-economic point of view.
\nTherefore, investors are likely to shift their funds to other
\nmarkets which offer lower risks. (alo)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/stability-of-ris-macro-economy-uncertain-econit-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}