Australia may boost growth forecasts for Indonesia

Australia may boost growth forecasts for Indonesia

CANBERRA (Dow Jones): Australia's Treasury Department said Tuesday it expects to upgrade calendar 1999 economic growth forecasts for Indonesia and South Korea issued May 11 in the government's budget.

Ken Henry, executive director of Treasury's economic group, told a Senate economics legislation committee that Treasury currently forecasts a 6 percent contraction in the Indonesian economy in 1999, swinging to 2.5 percent growth in 2000.

"But Indonesia could be significantly stronger in both 1999 and 2000," Henry said, citing recent quarterly economic growth data as the key factor behind the changed outlook.

The Indonesian economy grew 1.34 percent in the 1999 first quarter from the 1998 fourth quarter, but was down 10.34 percent from the year-earlier quarter. Jakarta expects gross domestic product growth of 0 percent-2 percent for the fiscal year ending March 31, 2000.

Henry said Treasury might also increase its growth forecast for South Korea in 1999 from 3 percent following better-than- expected GDP data for the first quarter, but likely will leave a 5 percent projection for 2000 unchanged.

Due to growth in private consumption, capital investment and export volume, South Korea's GDP grew 4.6 percent year-on-year in the first quarter of 1999.

Earlier this month, the country's Finance and Economy Minister Kang Bong-kyun said GDP could grow 4 percent-6 percent in 1999.

Treasury didn't give a timeframe for when it would adjust its economic forecasts.

Turning to China and ongoing market speculation that Beijing will devalue the yuan, Henry said Treasury believes this won't occur within the next 12 months.

"It seems to us unlikely that peg will be either adjusted or disappear, that is that China would either devalue or float, within the next 12 months," he said.