Economic growth to slow down, Ginandjar says

JAKARTA (JP): Indonesia's economic growth would slow down this year but likely recover the next as the currency crisis was only temporary, State Minister of National Development Planning Ginandjar Kartasasmita said here yesterday.

He said Indonesia's growth also slowed down in the early 1990s due to a tight monetary policy. But after the money pinch was eased, growth rebounded in the subsequent years.

"This economic growth slowdown will be temporary. Next year will see robust growth again," Ginandjar said after attending a seminar here.

Indonesia's economic growth fell below 7 percent in 1992 and 1993 following the tight monetary policy. But growth picked up in the following years, reaching 7.5 percent in 1994, 8.2 percent in 1995 and 7.8 percent last year.

A lower growth rate this year was due to the government's tight monetary policy and the postponement and rescheduling of large government projects aimed at preventing the currency crisis from worsening into an economic crisis.

"We should not pursue high growth at the expense of other important things," Ginandjar said.

Meanwhile, Minister of Foreign Affairs Ali Alatas told the Jakarta Foreign Correspondents Club yesterday that growth might not slow down as much as previously feared because of the currency crisis.

In a worst-case scenario, Alatas said, growth would slow to about 5.5 percent this year.

"But it may not be that bad," he was quoted by Reuters as saying. "It may only go down to 6 percent."

"Even if there is a slowdown in the rate of growth, and there will be, it will still be quite a respectable rate," he said.

Coordinating Minister for Economy and Finance Saleh Afiff said last week that growth could fall to about 5 percent if the currency crisis continued.

In a bid to prevent the currency crisis from worsening into an economic crisis, the government moved last week to revise its budget, liberalize foreign purchases of local shares and strengthen the banking industry.

The government has promised to postpone or reschedule some of its development projects to prevent deficit financing in the current budget due to an expected decline in tax revenues.

But Ginandjar said yesterday the government's move to postpone or reschedule some of its development projects should not affect growth in the long run as those projects could be resumed next fiscal year.

"When this currency turmoil recedes, we can resume the implementation of rescheduled projects next fiscal year," the minister said.

Ginandjar declined to name projects to be postponed or rescheduled as a special ministerial team was still discussing the retrenchment program.

He indicated that projects to be postponed would be those which required large funding from the state budget and large import financing and were not yet bound by any contract agreements. (rid)