World Bank predicts RI contraction will reach 15%<\/p>\n
SYDNEY (Reuters): A World Bank executive said yesterday that
\nthe contraction in the Indonesia economy could be up to 15
\npercent, higher than forecast by policymakers two months ago.<\/p>\n
"The worst (of the Asian nations) will be Indonesia at 10-15
\npercent," Jean-Michel Severino, World Bank vice president for
\nEast Asia and the Pacific, said in a speech.<\/p>\n
"Right now we are running the numbers (on the final
\nforecast)," Severino said.<\/p>\n
The country's latest budget, agreed with the International
\nMonetary Fund in April, projected an economic contraction of five
\npercent and inflation of 45 percent in 1998.<\/p>\n
But the IMF has since said the forecasts will need to be
\nrevised. Its top Asia expert Hubert Neiss has said he had no
\nreason to doubt forecasts of a contraction of 10 percent or more
\nthis year.<\/p>\n
The Asian economic crisis, which began with sharp currency
\ndeclines in mid-1997, has led to bailout packages led by the
\nInternational Monetary Fund for Thailand, Indonesia and South
\nKorea totaling more than US$100 billion.<\/p>\n
Indonesia will receive than US$40 billion but disbursement has
\nbeen delayed by upheaval in the country earlier this year which
\nsaw Soeharto replaced as president by B.J. Habibie following
\nsocial unrest and concerns over commitment to economic reform.
\nSeverino said hardship in Indonesia was growing.<\/p>\n
"We see an additional 20-30 million people in Indonesia below
\nthe poverty threshold which is a dollar per capita per day."<\/p>\n
Asia<\/p>\n
Severino yesterday also urged G-7 nations to do more to help
\nsmaller Asian economies, saying such aid would also assist
\nJapan's recovery.<\/p>\n
In an interview with Reuters Television, Severino said East
\nAsia was an important market for Japanese exports and also noted
\nJapanese banks are by far the largest lenders to the region.<\/p>\n
"I think the key is that East Asia matters for Japan and Japan
\nmatters for the G-7," said Severino.<\/p>\n
The Group of Seven nations is holding a meeting of its deputy
\nfinance ministers and central bank officials, along with
\nrepresentatives from the Asian Development Bank, World Bank and
\nIMF in Tokyo on Saturday.<\/p>\n
Severino, who earlier told an Australian business group the G-
\n7 should help to finance budget deficits among weaker economies
\nin the region to avoid the risk of depression, said such aid was
\nin the G-7's interests.<\/p>\n
He said regional governments should be running budget deficits
\nover the next two to four years, with these deficits needing soft
\nloan funding. To do otherwise would force up domestic interest
\nrates.<\/p>\n
"This money has to come from the G-7 and from the developed
\ncountries in the region," Severino said.<\/p>\n
"The ADB and the World Bank have more or less reached their
\nhead limits," Severino said, adding it was critical that funds be
\nfound for high levels of social expenditure in the region.<\/p>",
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