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)