Wed, 17 May 2000

GDP forecast by BPS too low: Experts

JAKARTA (JP): Experts have unanimously disagreed with the Central Bureau of Statistics (BPS) over its extremely low 1.5 percent gross domestic product (GDP) forecast for 2000.

Head of the State Logistics Agency (Bulog) Rizal Ramli said on Tuesday the country was on track to reach economic growth of more than 4 percent this year.

He said the current weakening of the rupiah to the U.S. dollar was only temporary and due to a combination of external and domestic factors.

"The new BPS forecast is too extreme ... We have to question how the GDP will drop to such a low level," Rizal, former senior analyst at the Econit consulting company, said on the sidelines of a seminar on the economy.

Tony A. Prasetiantono also disagreed with the agency.

"BPS was too premature in making the forecast. The forecast is too pessimistic ... I regret it because it would only create more uncertainty."

Tony said that on the positive side, the BPS figure could be considered a warning to the government to immediately resolve domestic political and security problems, and to proceed with economic reform programs to help shore up the rupiah.

He was optimistic the government's GDP target of 3.8 percent this year would be attainable.

BPS chief Sugito Suwito said on Monday the bureau would revise down this year's GDP growth forecast to 1.5 percent from the initial target of 4 percent due to continuing political instability which was hampering the economic recovery process and putting pressure on the local currency.

"BPS will have to revise the country's whole year growth forecast from 4 percent to as low as 1.5 percent should the worst-case scenario apply," he said.

The country's economy contracted more than 13 percent in 1998 and posted tiny positive growth last year in the wake of a regional economic crisis that started in the middle of 1997.

Stability in the exchange rate of the rupiah against the U.S. dollar is seen as a key factor for the economic recovery.

The government assumes an exchange rate level of Rp 7,000 per U.S. dollar this year.

The local unit has now plunged to a seven-month low of around Rp 8,540 per dollar.

The government and the central bank have said that the weakening of the local currency was temporary and due to domestic economic and political uncertainty.

The Asian Development Bank (ADB) is also maintaining its 2000 GDP growth forecast for Indonesia of 4 percent.

ADB Indonesia resident mission chief Robert C. May also said on Tuesday the prediction from BPS appeared overly pessimistic.

"BPS had a pessimistic prediction, it's the worst-case scenario. I think at this moment we'd stay with our earlier (March) prediction. I think the 4 percent growth is still possible to be achieved," May said on the sidelines of a seminar.

He said predicted GDP growth would be realized if the country remained consistent with its economic reform program.

Meanwhile, Rizal said the government expected exports to become the second primary contributor to this year's economic growth after consumption.

He said the weakening of the rupiah should help boost the competitiveness of the country's export products.

Rizal said the government would strive too encourage the lending of excess liquidity in banks to increase the utilization of the country's production capacity from the current 60 percent level.

He said the President instructed related ministers and government institutions to resolve the problem of exports held up at the country's shipping ports. (rei/cst)