Fri, 18 Aug 2000

Confidence drops again in July: Danareksa survey

JAKARTA (JP): The confidence of chief executives in the country's economy declined in July by 1.3 percent to a level of 116 percent, according to the latest survey conducted by the Danareksa Research Institute.

The research agency said in a statement on Wednesday that the decrease was recorded in different types of companies and across all sectors, with the mining sector showing the largest drop of 11.2 percent to touch its lowest ever level of 117.5 percent.

The slide in business confidence coincides with the plunge of the rupiah and the Jakarta Composite Index (JCI) as well as the Consumer Confidence Index (CCI) since March.

Over the past four months, the rupiah, JCI and CCI have plummeted by 12.6 percent, 18.5 percent and 14.2 percent respectively.

While, at the same time, the business sentiment index slipped by only 4.2 percent, the institute said.

The decreasing trend in these factors were unfolded when domestic political tensions become more intensified.

"The simultaneous happenings, with the slower pace of the fall in the business sentiment index compared to the other three factors, suggests that businessmen are more resilient to political volatility than portfolio players and consumers," the institute said.

The business sentiment survey was conducted by the institute to investigate the assessment of top business executives on current economic and business conditions as well as their expectations for the next six months.

The institute said business confidence in the credibility of the government was found to be continuously deteriorating, as reflected in the drop of the index by 8.1 percent to 119.8 percent, its lowest level ever.

The confidence index on the government's credibility in maintaining political and social stability plunged by 9.9 percent to 121.1 percent.

While the confidence index on the government's credibility to uphold the law crashed to 101.3 percent after previously sagging by 14.2 percent.

The institute's survey also found that the business community's expectation index readings in July plunged to 128.5 percent from 131.4 percent in May.

"Top executives' confidence in the overall outlook in the next six months continued to weaken," it said.

Executives' responses recorded in the survey regarding their current business operations and financial performance and their expectations for the next six months declined in all sectors and all types of companies, except agriculture and state-owned companies.

The sales expectations index fell for the third consecutive month in a row and now stands at 154.7 percent, down 3.4 percent from May.

The survey also shows that less upbeat sales expectations were more uniformly shared across sectors and different types of companies.

The sales expectation index, however, improved slightly in agriculture, mining and state-owned companies. (cst)