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)