BI chief sees BoP surplus

BI chief sees BoP surplus

JAKARTA (JP): Bank Indonesia Governor J. Soedradjad Djiwandono
predicted yesterday that Indonesia will continue to enjoy a
surplus in its balance of payments next year, despite investors'
jitters over the coming general election.

"We foresee that based on continuing large capital inflows,
our capital account will be in surplus, which will be enough to
finance our current account deficit. And our reserves will be
higher," Soedradjad told a press conference here yesterday.

The governor declined to predict the extent of the expected
surplus.

His remark came amid growing concern that Indonesia will
suffer a negative balance of payments next year because general
elections generally discourage capital inflow and encourage
capital outflow.

The Institute for Development of Economics and Finance has
predicted that Indonesia will suffer a deficit of US$700 million
in its balance of payments next year, after a projected surplus
of $200 million this year.

Soedradjad, however, believes that Indonesia Indonesia's
export performance will improve this year and next, enabling
containment of any possible increase in its current account
deficits.

"I am not pessimistic about our export performance. It is true
that the growth of our exports slowed down during the last three
years, but not now," Soedradjad said.

He noted that a number of leading export products, which
experienced drops in growth in the past three years, have started
to grow significantly this year.

Exports of textiles and textile products, for instance,
increased by 2.8 percent during the first eight months of this
year to US$3.9 billion from $3.8 billion in the same period of
last year. Textiles represent 14 percent of Indonesia's total
exports.

Although exports of wood products, which constitute 11 percent
of the country's total exports, dropped by 6.17 percent to $3.3
billion in the first eight months of this year, from $3.5 billion
in the same period of last year, Soedradjad expressed optimism
because a number of export products, especially electronics and
jewelry, are steadily gaining more popularity in international
markets.

"When I was a junior minister of trade, I did not find export
figures for jewelry products in our statistics. Now, these
products contribute some $300 million in foreign exchange,"
Soedradjad said.

The governor noted that developed countries are projected to
enjoy better economic growth this year and next. This means that
they will absorb more products from developing countries,
including Indonesia.

Growth

Soedradjad projected that Indonesia's economic growth will be
lower this year and next, standing at some 7.5 percent, compared
to 1995, which saw an 8.1 percent growth.

"In fact 7.5 percent is already high, compared with our five-
year plan target of only 7.1 percent per annum," Soedradjad said.

Meanwhile, managing director of the International Monetary
Fund Michel Camdessus commended Indonesia's economic performance,
saying that growth has proven to be sustainable.

As the country embarked on efforts to cool down economic
overheating, Camdessus noted that "reducing growth is not bad
news at all as it contributes to establishing your growth on a
more sustainable path."

He noted that Indonesia still needs to pursue higher growth,
without economic overheating in order to provide more employment
opportunities, especially for "young intellectuals".

To pursue high growth without causing overheating, Camdessus
suggested that the Indonesian government continue to liberalize
its market, eliminate bureaucratic bottlenecks and provide a more
conducive climate for the private sector. (rid)