APEC analysts predict slower growth for RI

APEC analysts predict slower growth for RI

By Meydiatama Suryodiningrat

VANCOUVER, Canada (JP): The Asia Pacific Economic Cooperation
(APEC) forum predicted an optimistic 6.5 percent growth for
Indonesia this year and 6 percent next year.

But the 1997 APEC Economic Outlook report noted that its high
current account deficit had been one of the triggers which caused
the financial crisis in Indonesia.

The Outlook, remains generally optimistic that the region
would still prosper despite the economic woes.

The Outlook forecasts an overall sustained expansion for 1998
at a rate of 3.1 percent GDP growth for APEC economies, slightly
down from this year's expected region wide growth of 3.4 percent.

The 122-page report was presented to APEC ministers during
their meeting here on Friday by John Curtis, chairman of the APEC
Economic Committee.

The Outlook in its chapter on Indonesia reduced its initial
forecast for economic growth in 1997 from 7.1 percent to 6.5.
Growth for 1998 was put at 6.0 percent.

It cited "spillover effects of the currency instability in the
region as well as risks to outlook from the haze, which has
curtailed tourist arrivals, and possible weather related
reductions in agricultural output from the El Nio effect" as
reasons for the lower growth.

Dr. Soogil Young, president of the Korean Institute of
International Economic Policy which coordinated the research,
said the "Indonesian economy is generally sound" and its
financial sector had a history of being exposed to the
international scrutiny and thus should be able to recover from
the financial crisis.

The report noted that despite some decline private investment
remains buoyant, reflecting a more conducive business climate
following the adoption of various deregulation measures.

Imbalance

Among the major concerns cited by the report, is the high
current account imbalances of many countries in the region,
including Indonesia.

Eight economies -- Australia, Chile, South Korea, Malaysia,
Indonesia, New Zealand, the Philippines and Thailand -- have
current account deficits exceeding 3 percent of their GDP.

The Outlook points to large account imbalances as one
important factors in the financial market instability experienced
by some southeast Asian members.

John Curtis also pointed out that those being hit by the
economic turbulence, Thailand, the Philippines, Malaysia,
Indonesia and Korea, were the hardest hit.

In analyzing the instability the report stresses the
importance of adopting sound macroeconomic policies to address
the underlying causes of recent difficulties, including the need
to strengthen financial sectors and increase transparency of
economic and financial policies.

"Current account deficits need not be a problem, particularly
in economies that are growing rapidly. If the capital inflows are
needed to finance deficits and are underwriting an expansion of
the productive capacity of the economy, current account deficits
need not be associated with an increase in the difficulty of
servicing foreign debt," the Outlook said.

Speaking on the prospective of the region, the report says
that throughout the year there has been more than variability in
growth.

It said that growth in North America APEC members was faster
than expected but slower in many Asian states.