BI sees 4.5% to 5.5% growth in 2002

BI sees 4.5% to 5.5% growth in 2002

JAKARTA (JP): Bank Indonesia predicted that the economy would
enjoy higher growth of between 4.5 percent and 5.5 percent in
2002, compared to between 3 percent and 4 percent estimated for
this year.

Speaking at a hearing session with the House of
Representatives Commission IX on state budget and finance on
Tuesday, Bank Indonesia Governor Sjahril Sabirin said that
inflation next year would decline to a range of between 7 percent
and 9 percent from between 8 percent and 10 percent in 2001.

Sjahril said that the exchange rate of the rupiah could
strengthen to between Rp 8,000 and Rp 9,000 per U.S. dollar.

He added, however, that this macroeconomic target could be
achieved only if social and political problems were resolved and
that the economic restructuring program could be accelerated.

He particularly cautioned the slow progress in the
restructuring of corporate overseas and domestic debts and in the
restoration of the banking intermediation role that was still
creating "serious" uncertainty in the economy.

Sjahril said that an improvement in the world's economy next
year would have a positive effect on the local economy.

He said that domestic economic growth in 2002 would be driven
by exports, consumption and investment.

He said that a stronger exchange rate of the rupiah next year
would help pull down inflation.

Elsewhere, Sjahril said that the macroeconomic condition had
not improved as significantly as expected at the beginning of
this year due to the increase in risk and uncertainty.

He explained that the slow progress in the corporate
restructuring program, deterioration in relations with the
International Monetary Fund (IMF) and the worsening domestic
political conditions had caused confidence in the economy to
continue to plunge.

He added that economic slowdown in the world economy had also
badly affected the local economy.

The worsening macroeconomic condition had prompted the
government to revise the 2001 state budget and adopt painful
measures, including raising fuel prices by an average of 30
percent, and electricity rates by 17.47 percent to prevent the
budget deficit from widening to a dangerous level of 6 percent of
gross domestic product (GDP).

The budget now assumes an economic growth of 3.5 percent,
inflation of 9.3 percent, and an exchange rate of 9,600 per
dollar.

Separately, Bank Indonesia deputy governor Achjar Iljas said
that the government might fail to achieve its 9.3 percent
inflation target if the rupiah continued to weaken.

The rupiah is currently hovering at Rp 11,365 per dollar as
investors continue to be jittery about the outcome of the
People's Consultative Assembly's (MPR) plan to impeach President
Abdurrahman Wahid on Aug. 1.

"It will be difficult to achieve the target, given the
unfavorable circumstances," he said.

Economists predicted earlier that inflation this year could
hit double digits of around 14 percent as the rupiah remained
under pressure.

The lower value of the rupiah against the dollar increases
production costs because the country's production system largely
depends on imported raw materials and components.

But earlier on Monday, Coordinating Minister for the Economy
Burhanuddin Abdullah expressed optimism that the government could
achieve its 9.3 percent inflation target, citing improvements in
the domestic political climate and better relations with the IMF,
which is providing a multibillion dollar bailout for the economy.

Burhanuddin said that inflation in the first semester was
normally high, but would decline in the second semester.(rei)