ADB cuts RI growth forecast to 3.2%
ADB cuts RI growth forecast to 3.2%
Moch. M. Kurniawan, The Jakarta Post, Jakarta
Indonesia's predicted economic growth this year has been slashed
by about 25 per cent, the Asian Development Bank (ADB) said on
Friday.
ADB revised its economic growth forecast for Indonesia this
year from the 4.2 percent predicted in April to just 3.2 percent
due to a global economic recession deepened by the Sept. 11
terrorist attacks on the U.S.
ADB also cut its 2002 growth forecast from 4.5 percent to 3.9
percent.
"Higher growth will be possible (next year) with significant
improvements in political and security conditions," it said in
its latest outlook report on Asia.
The government predicted the economy would grow by 3.5 percent
this year, and 4 percent next year. The initial government
forecast for 2002 was 5 percent. Last year, the economy grew by a
hefty 4.8 percent mainly driven by strong export performances and
rising oil prices.
Analysts have said that the world economic slump would
negatively affect Indonesia's economy as exports fall.
The cut in the economic forecast increases the threat of
greater unemployment in the country of more than 200 million
people already badly affected by years of economic crisis and
political upheaval.
On Thursday, Indonesia's key donors, under the umbrella of the
Consultative Group on Indonesia (CGI), pledged some US$3.14
billion in new loans to help finance the 2002 state budget plus
$586 million in grants and technical assistance.
The government is scheduled to meet the Paris Club of creditor
nations in February next year to seek a rescheduling facility for
some Rp 27 trillion (about $2.6 billion) in sovereign debt.
Elsewhere, ADB said inflation this year might hit 11 percent
due to a weaker rupiah, accommodative monetary policy, and hikes
in administered prices such as fuel and electricity.
For 2002, inflation would stay at 9 percent although it would
go beyond an earlier prediction of 6 percent, the Bank said.
ADB said that despite renewed optimism following the election
of President Megawati Soekarnoputri late in July, the economy was
plagued with new uncertainty due to negative publicity resulting
from rising anti-U.S. protest at home in the wake of the U.S.-led
attacks on Afghanistan.
The Bank said this would likely further reduce potential
investment inflows "and perhaps exacerbate capital flight from
the country."
ADB said the government must pursue policies to stabilize the
economy and relaunch tough reforms that are needed to stimulate
the economy.
The Bank also warned that the government should speed up asset
sales and privatization.
"Failure to meet the privatization and asset sales targets
will jeopardize recovery prospects and further restrict
development investment," ADB said.
On the economic outlook for other countries in the region, ADB
said that Singapore, Taiwan, South Korea, and Hong Kong, had seen
their economies suffer serious setbacks due to the impact of the
world slump.
These countries were expected to undergo an economic
contraction in 2001, except for Korea which was forecast to
eke out 2 percent growth after expanding by 8.8 percent in 2000.
China's forecast remains unchanged from ADB's April report at
7.3 percent this year, the region's highest growth forecast.