Analysts predict buoyant growth in 1996, 1997

Analysts predict buoyant growth in 1996, 1997

JAKARTA (JP): The Econit economic research group predicts
buoyant 7.5 percent growth for 1997, despite the political and
economic uncertainties that could emerge.

Growth will reach 7.3 percent this year, lower than the 8.1
percent recorded last year, Econit says, attributing the slow
down to the government's efforts, including monetary
contractions, to cool down the economy.

"All economic factors, both macro and micro, seem all right,
and the cooling-off tendency will continue until the first
semester of next year. If everything is okay, our economy will
rebound in the second semester," Rizal Ramli, a director of
Econit, said in announcing its Economic Outlook 1997 on Saturday.

The level of political uncertainty can be expected to increase
next year and that it will very much influence the economic
outlook, he said.

"If political uncertainty becomes political volatility and
unrest, deviations and variance of economic outlooks will also be
greater, and we must revise downward our growth prediction."

Next year's political uncertainty and anxiety will be
influenced by sociopolitical factors, including the political
dynamism expected toward next year's general election, he said.

"Social and political groupings will move to strengthen their
political leverage before and after the general election, as well
as before the creation of a new cabinet in 1998," Rizal said.

Econit managing director Arif Arryman said there will be a
great deal of non-budgetary spending and increases in the
government's routine expenditures to ensure that Golkar, the
ruling political group, win the election.

"Like in any other country, the government usually uses an
election-driven fiscal policy. That means increasing its budget
prior to the general election to ensure the win of the ruling
political group," Arif said.

Such non-budgetary spending and inflated routine spending will
undermine the efforts to cool down the economy, he warned.

The World Bank and the International Monetary Fund have urged
Jakarta to cool down its economy by reducing spending and thus
producing a surplus in its budget by between 2 to 3 percent of
gross domestic product.

Presidency

As for the country's presidency, Rizal said, Econit does not
take a special view.

"Everybody knows that Golkar will win in next year's general
election and the president will remain the same," he said.

Such a situation would bear specific uncertainty if something
happened to the incumbent President Soeharto, because nobody
knows who could replace him, he said.

Indonesia still relies on a personalized, not
institutionalized, decision making process, in the political,
economic or legal sectors; and this will increase the level of
both political and economic uncertainties, Rizal said.

Political and economic uncertainties will influence the
realization of foreign direct investment commitments. Some of the
projects are very likely to be postponed, he said.

A delay in the realization of foreign investment projects
would help reduce the country's imports. However, this could also
reduce the government's capability to cover up the country's
deepening current account deficit.

Indonesia's export performance will not improve significantly
next year because of the strengthening of the rupiah against the
U.S. dollar, Econit forecasts.

In addition, the supply response of Indonesia's exports to the
improving economic growth in developed countries has proven to be
slow, Econit said in its report.

Meanwhile, Indonesia's exports remain dependent on markets in
developed countries, especially those in the Organization for
Economic Cooperation and Development (OECD), as almost 60 percent
of Indonesia's total exports of $45.4 billion last year went to
the OECD countries. (rid)