Economy expected to reach sustainable growth in 1998
Economy expected to reach sustainable growth in 1998
JAKARTA (JP): Indonesia's economy will start recovering this
year and reach a sustainable growth in 1998 -- about a year
behind most developed countries in the Asia-Pacific region, noted
economists predict.
Suhadi Mangkusuwondo, a member of the Indonesian National
Committee of the Pacific Economic Cooperation Council (INCPEC),
said the one-year lag of Indonesia's economic recovery was
because economic developments in Indonesia followed trends in
Japan and the United States.
"Indonesia and several other developing countries will
experience this lag," he said at a press conference at the Centre
for Strategic and International Studies (CSIS).
Yesterday's conference was also attended by economists Mari E.
Pangestu of CSIS, and Miranda W. Goeltom. Goeltom and Suhadi are
coordinators of INCPEC's Pacific Economic Outlook, an annual
short-term forecast of 20 East Asian, North American and Latin
economies.
Suhadi, quoting the report, said most Pacific Rim economies
were expected to have a slightly faster economic growth this year
and next year -- marked by low inflation rates -- following a
"soft landing" in 1995 and a recovery last year.
Indonesia's 1994 economic growth stood at 7.5 percent and
increased to a high 8.2 percent in 1995. It slowed to 7.8 percent
last year. The report predicted economic growth this year at 7.3
percent.
"The soft landing was achieved ... in 1995, the recovery in
1996, and the forecast for sustained growth in 1997 and 1998
reflects the strong macroeconomic fundamentals and enhanced
economic management capabilities in most of the region," he said.
Indonesia, however, achieved a soft landing last year, after
it went through rapid growth in 1995 which caused an overheating
of the economy.
"For Indonesia, the recovery will only start this year and
sustained growth can be achieved next year and, hopefully,
continue into 1999," he said.
Miracles
He said the soft landing experienced by most countries in the
Asia-Pacific, beginning in 1995, was not an indication of a
collapse of the "East Asian economic miracles".
Suhadi said the report predicted Indonesia's economic
fundamentals would continue to grow strongly, led by rapid
investment activities by domestic and foreign investors.
"Indonesia will continue its investment-led growth," he said.
In 1994, he said, investment contributed 48.3 percent to the
country's gross domestic product (GDP). In 1995, the figure was
47.2 percent and last year it was 45.6 percent.
Net private capital inflow in the 1994/1995 fiscal year
reached US$4.6 billion, increasing to $11.7 billion in 1995/1996
and was estimated to reach $11.8 billion in 1996/1997.
Suhadi said the World Bank ranked Indonesia the third largest
receiver of private capital last year after China and Mexico.
Total private capital inflow to developing countries last year
was $343.8 billion.
Despite Indonesia's bright outlook, Suhadi said that several
problems still loomed. These included the increasing current
account deficit, which he said might reach between 4 and 4.5
percent of GDP this year.
Suhadi's prediction is very similar to Bank Indonesia's
(central bank) projection which foresees the current account
deficit reaching $9.8 billion this (1997/1998) fiscal year
(ending next March), or 4 percent of the country's GDP.
In the last fiscal year it stood at $8.8 billion, up from $7
billion in 1995/1996.
Suhadi said other problems to be tackled were the need to
maintain monetary stability and to continue economic reforms.
"It seems that deregulations are rarer, while they are still
needed to eliminate the distortions that still prevail," he said.
He said non-economic aspects that the government should be
wary of included social and political stability, which would
affect the investment climate.
"This is a very important factor because Indonesia is
basically an investment-led economy," he said.
Suhadi said the government should also make sure that economic
reforms were supported by everyone.
"Some people might not like (economic reform) and could even
be against it," he said. (pwn)