Economy shrinks for first time in 30 years

JAKARTA (JP): Indonesia's economy plunged into negative growth for the first time in 30 years in the January-June period of this year, with a 12.3 percent contraction in the economy as compared to the same period in 1997, the Central Statistics Agency (BPS) reported yesterday.

BPS head Suwito Sugito said that gross domestic product (GDP) based on 1993 prices was projected to shrink by 13.06 percent over the course of 1998, the first time negative economic growth has been recorded since 1969.

"Almost all sectors of the economy recorded a downturn in the first six months of 1998 which was caused primarily by the sharp decline in the rupiah against the U.S. dollar," he told reporters at a media conference.

He added that political infighting since the May 21 resignation of former president Soeharto had discouraged investment and further hindered an economic recovery.

"Judging from the performance in the first half of this year, the economy will continue to face a serious crisis for the remainder of 1998," Sugito said.

The second quarter of this year was the worst period. During that quarter a year-on-year plunge of 16.54 percent was recorded, while the contraction in the first quarter was only 7.89 percent, he said.

He also said that negative economic growth and the sharp decline in the value of the rupiah against the dollar had slashed per capita gross national product to US$436 from $1,055 in 1997.

Among the sectors of the economy worst hit by the crisis were those which had a relatively high dependence on imported components, he said, pointing to the automotive and electronics sectors which contracted by more than 55 percent, construction which contracted by 36.08 percent, and fertilizers, chemicals and medicines which declined by 21.03 percent.

He also said that some sectors had been badly hit by the decline in purchasing power, including air transportation companies, the hotel industry, restaurants and other enterprises in the entertainments industry.

Sugito said that small growth had been recorded in the agriculture, electricity, oil, gas and drinking water sectors.

He also said that almost all sectors would experience negative growth over the whole of 1998, but that agriculture would actually increase its contribution to GDP, for the first time in 30 years, from 16 percent last year to 18 percent this year.

He pointed out that the agriculture sector was the least dependent on imports and provided a shield against the plunge in value of the rupiah.

"Natural resource based sectors like plantations, forestry and fisheries will also show positive growth this year," he added.

Sugito said that because of increasing domestic prices almost 70 percent of GDP would be eaten up by household expenditure in 1998, compared to 62.19 percent last year.

Although the IMF sponsored program of economic reform was expected to improve the country's economy, he said that the benefits would not come quickly because the program would be implemented gradually.

The IMF has committed itself to providing a total $10 billion in loans to Indonesia, of which $4 billion has already been extended and a further $1 billion of which is expected to be disbursed soon.

The IMF has predicted that the country's economy will contract by 10 percent over the 1998/1999 fiscal year.

Other donor institutions including the World Bank have committed a total of $33 billion to Indonesia.

The World Bank said yesterday that Indonesia's economy this year was expected to shrink by around 15 percent.

It said that it would provide some of the additional $4 billion to $6 billion Indonesia would required to close its budget deficit during the current fiscal year.

Indonesia's budget deficit is expected to soar to 8.5 percent of GDP. Most of the deficit arises from commitments to subsidize a number of essential goods. (rei)

Table I: Gross Domestic Product (GDP) growth by sector (in percentage) over 1997 period, based on 1993 constant prices

Sector 1 semester* All year** --------------------------------------------------------------------- 1. Agriculture, husbandry, forestry and fishery 0.25 0.26 2. Mining and quarrying (7.57) (6.87) 3. Manufacturing (13.3) (12.0) 4. Electricity, gas, and drinking water 0.3 (2.19) 5. Construction (36.8) (35.44) 6. Trade, hotel and restaurant (17.53) (21.42) 7. Transportation and communication (6.49) (11.56) 8. Finance, rentals and company services (16.88) (18.58) 9. Services (5.11) ( 5.17)

Gross Domestic Product (12.23) (13.06)

* First semester of 1998 over first semester of 1997 ** Estimate for 1998 over 1997

Source: Central Bureau of Statistics

Table II: Gross Domestic Product by sectors for 1997 and 1998 (in billion rupiah)

Sector 1997 1998

Current 1993 Current 1993

prices prices prices prices ------------------------------------------------------------------------- 1. Agriculture, husbandry,

forestry and fishery 100,349.1 64,149.1 171,661.8 64,313.1 2. Mining and quarrying 59,492.1 38,181.5 108.404.7 35,558.1 3. Manufacturing 159,829.9 108,631.4 257,062.4 95,592.8 4. Electricity, gas, and

drinking water 7,586.3 5,413.9 10,448.6 5,295.3 5. Construction 47,012.9 35,036.9 51,873.6 22,619.8 6. Trade, hotel and restaurant 104,432.9 73,160.5 140,426.9 57,490.4 7. Transportation and

communication 42,231.8 32,204.1 55,247.5 28,481.3 8. Finance, rentals and

company services 49,564.8 39,184.0 93,134.4 31,903.0 9. Services 53,837.3 37,723.8 63,126.1 35,773.8

Gross Domestic Product 624,337.1 433,685.2 951,385.9 377,027.6 GDP excluding oil/gas 570,627.8 399,458.7 850,663.1 343,041.1

Source: Central Bureau of Statistics

Table III: Per capita GDP and GNP, 1997 and 1998 at current prices

1997 1998

Rupiah US$ Rupiah US$ ---------------------------------------------------------------------- 1. Per capita GDP 3,123,763 1,088.7 4,689,564 449.2 2. Per capita GNP 3,028,112 1,055.4 4,555,004 436.3 3. Average Rupiah/$ exchange rate 2,869 10,439

Source: Central Bureau of Statistics

Table IV: Gross Domestic Product by aggregate demand (in billion rupiah)

1997 1998

Amount % Amount % ---------------------------------------------------------------------- 1. Household expenditure 388,255.1 62.19 665,210.7 69.92 2. Government expenditure 42,952.0 6.88 43,654.9 4.59 3. Fix gross domestic

capital formation 179,269.2 28.71 185,051.3 19.45 4. Stock formation *) 20,979.3 3.36 37,408.2 3.93 5. Exports of goods and services 175,310.2 28.08 282,681.8 29.71 6. Minus imports of

goods and services (182,428.7) (29.22) (262,621.0) (27.60)

Gross Domestic Product 624,337.1 100.00 951,385.9 100.00

Source: Central Bureau of Statistics