Economists foresee 1998 as a year of distress
Economists foresee 1998 as a year of distress
JAKARTA (JP): The worst impact of the currency crisis, which
has been plaguing Indonesia over the past three months, would be
felt next year, the Institute for Development of Economics and
Finance (Indef) predicted yesterday.
Indef chairman Faisal Basri said that next year would see a
sharp decline in foreign investment and a sharp rise in prices of
some main commodities and services.
"We expect economic growth (in gross domestic product terms)
to decline to 6.4 percent this year and 6 percent next year from
8 percent last year," Faisal said.
He said property, construction and financial sectors would be
hardest hit by the currency turmoil.
A major political event of the People's Consultative
Assembly's General Assembly, which will elect a new president and
vice president in March, would affect the inflow of foreign
capital, Faisal said.
"Even though President Soeharto is certainly to be reelected,
the formation of the new cabinet would influence foreign
investors' sentiment in Indonesia," he said at a seminar.
Potential foreign investors would likely wait for the
formation of the new cabinet, he said.
Faisal said the government might also raise the price of
electricity and fuel oil, telecommunications and transportation.
"The surge of prices and tariffs as a result of the rupiah's
depreciation would burden the common people," he added.
However, tight liquidity would continue to ease, he said.
Faisal said government efforts to reform banking and property
sectors, the two sectors worst affected by the crisis, would face
challenges next year, as there were many politically influential
people in those sectors.
"But if the government does not reform the two sectors soon,
Indonesia will face more economic turmoil," he said.
It is estimated that the current account deficit will decline
to US$6.2 billion this year, due to less imports.
The surplus of the overall balance of payments will fall to
US$500 million because of the decline in capital inflow and the
loss of portfolio investment. (das)