BI expects 1999 GDP maximum at zero percent

JAKARTA (JP): Bank Indonesia reiterated on Monday its earlier forecast that Indonesia's economic growth this year would be between minus one and zero percent.

"The board of governors are of the opinion that the overall 1999 real gross domestic product (growth) is still slow at between one and zero percent," the central bank said in a press statement following its monthly board of governors meeting.

BI said on the demand side growth would be stimulated, particularly by an increase in private sector consumption driven by lower interest rates and improving consumer expectations.

"This is also supported by a higher profit margin in certain business sectors," BI added.

The central bank believed the economy could grow faster if the bank and real sector restructuring process runs well.

Indonesia's economy suffered a contraction of more than 13 percent last year when the economic crisis deepened.

BI also forecast the 1999 inflation rate would be in the range of two to three percent.

The central bank explained the inflation level would still be relatively low, despite Christmas and the Moslem fasting month holidays in December, and New Year and Idul Fitri celebrations in January, because of the low inflation during the past 10 months and the existence of unused production capacity in the economy.

Inflation in October was 0.06 percent, the first inflation since March, sending the year-on-year inflation to 1.58 percent. The economy suffered hyperinflation of more than 77 percent in 1998.

BI said that along with the low inflation level, the central bank benchmark interest rate was expected to be between 10 and 12 percent by the year end.

The interest rate on Bank Indonesia one-month SBI promissory note is currently at 13.06 percent.

The central bank also reported in a press statement that its net foreign exchange reserves as of October 29 were at US$16.20 billion, an increase of $62.70 million on the previous week's level, due to an increase in oil revenue.

The Bank also said that gross forex reserves increased by $63.90 million to $27.14 billion during the week. (rei)