Balance of payments to be in ample deficit
Balance of payments to be in ample deficit
JAKARTA (JP): Indonesia's overall balance of payments is projected to suffer a large deficit this year owing to a sharp deterioration of its current account, a research group said.
The Institute for the Development of Economics and Finance concluded in its year-end report that Indonesia's balance of payments deficit will likely reach US$1.5 billion this year, up from an estimated $0.4 billion last year.
Indonesia enjoyed a surplus of $0.8 billion in its overall balance of payments in 1994.
"Our projections assume that the current account (balance of trade plus service transactions) will suffer a deficit of $6.1 billion this year, up from $5.6 billion last year," Faisal H. Basri, a institute researcher, said when releasing the report last Saturday.
The research group estimated Indonesia's net official capital flows at $1.2 billion, down from $1.7 billion last year; direct foreign investment at $3.3 billion, up from $3 billion; and short-term (mostly portfolio) capital flows at $100 million, down from $500 million.
To reduce the current account deficit, institute chairman Didik J. Rachbini suggested that the government, especially the new Department of Industry and Trade, take drastic measures to drive up exports by diversifying products and markets.
"Our traditional export commodities have lost energy to generate more foreign exchange. Therefore, from now on we should take down-to-earth measures to stimulate other export commodities. We actually have export potentials in many sectors," Didik said.
He added that the government should also make a concerted effort to strengthen export-supporting services like shipping.
He estimated the service account deficit to swell to $10 billion this year, from a projected $9 billion last year and $7.4 billion in 1994.
"We expect capital flights to increase this year and next year, especially a few weeks before the 1997 general election. Many investors will just avoid betting on our political condition, which is full of uncertainties," Faisal said.
Economic growth
Despite its estimate of a huge balance of payments deficit, the research group endorses the projections of other analysts that Indonesia will maintain its high economic growth this year, above 7 percent, and a lower inflation rate.
The institute foresees this year's economic growth to be 7.3 percent, above the government target of 7.1 percent.
Based on its estimates, sectors which will continue experiencing high growth include non-oil mining which will book 13.3 percent growth, infrastructure (electricity, gas and running water) with 12.25 percent and manufacturing with 11.5 percent.
Agriculture, where the majority of Indonesians earn their living, will likely enjoy higher growth this year at 3.7 percent, compared to the projected 2.9 percent last year and the 0.4 percent in 1994.
The inflation rate will hit 7.6 percent this year, much lower than rates recorded in the previous years, the institute predicted.
Optimistic forecasts put last year's inflation rate at below 9 percent, compared to 9.24 percent in 1994.
Didik suggested that the government concentrate on deregulating the real sector to curb inflation because "we can no longer expect the monetary sector to do most of the anti- inflation drive." (rid)
Editorial -- Page 4