Economy contracts 13.59% in first nine months

Economy contracts 13.59% in first nine months

JAKARTA (JP): The country's gross domestic product (GDP)
contracted 13.59 percent in the first nine months of 1998
compared to the same period last year, the head of the Central
Bureau of Statistics (BPS), Sugito Suwito, said on Monday.

"We forecast a further slight contraction in the fourth
quarter so that the year could end up with negative growth of
13.75 percent," he told the media after announcing the September
inflation level.

He didn't give details on which sector was worst hit by the
recession.

The economy shrunk 12.02 percent during the first half of the
year with almost all sectors slumping. The exceptions were the
agriculture and export sectors.

Some experts have predicted the economy will deflate by 15
percent as the country struggles to recover from its worst
economic crisis in three decades.

The economy managed to grow 4.6 percent in 1997, which was
more than half of the annual growth during the boom years of the
pre-crisis period.

Sugito said that the consumer price index rose 3.75 percent in
September, less than the 6.30 percent in August, bringing the
January-to-September cumulative inflation rate to 75.47 percent.

He explained that increases in food prices, especially rice
was the major contributor to the September inflation figure.

"Rice contributed around 40 percent to the September inflation
level," he said.

"It will be quite difficult to achieve the government target
of 80 percent inflation for the 1998 calendar year," he said,
pointing out that the price of rice may remain volatile although
it would not be as bad as in September.

Sugito added that the inflow of international rice aid and
government imports was expected to help stabilize the price of
the food staple.

"What needs to be improved is the distribution system," he
said.

The food price index jumped 8.61 percent in September from
August while the processed food, beverages, and cigarette index
increased 2.96 percent, the housing index 1.57 percent, health
index 3.28 percent, education, recreation, and sports index 1.24
percent and transport and communications index 2.10 percent, the
BPS report said.

It added, however, that the clothing index declined 0.23
percent, especially due to a sharp drop in the gold and jewelry
subindex.

"It seems that the relatively stable rupiah at around Rp
11,000 to the U.S. dollar has reduced the incentive for people to
invest in gold," he said.

Sugito said that if rice was excluded from the 41 commodities
that rose in price, the inflation level in September would have
only been 2.26 percent.

"The demand pressure on rice is extremely strong. We need to
work on this," he said.

He said that the lower inflation level in September was
attributable to the better monetary situation as the result of
the restructuring in the banking sector, to the disbursement of
international aid, the elimination of monopoly in several basic
commodities, and the social safety net program.

"On the economic side, we seem to be on the right track.
Further developments will depend on whether we can take advantage
of this situation to prevent further volatility in prices," he
said.

"If we can maintain the current relatively calmer environment
for economic players to run their businesses, we can expect lower
inflation next year," he added.

Sugito said the trade surplus in July totaled US$2.21 billion,
down from $2.35 billion in the previous month.

Exports in July totaled $4.65 billion, comprising $658.6
million in oil and gas exports and $3.99 billion in non-oil and
gas exports. Total exports for the January-to-July period were
$29.22 billion, which was 2.89 percent lower than the same period
in 1997.

Imports in July were $2.45 billion, consisting of $210.6
million in oil and gas imports, and $2.24 billion in non-oil and
gas imports. For the January-to-July period total imports
amounted to $15.75 billion, representing a 37.13 percent fall
from the same period last year. (rei)