Thu, 04 May 2000

GDP growth to be over 4 percent in first quarter: BI

JAKARTA (JP): Bank Indonesia (BI) said on Wednesday the country's economic growth would exceed its initial target of 4 percent in the first quarter this year compared to the same period last year.

Deputy governor Achjar Ilyas said the central bank still needed one or two days to know the exact figure of the first quarter's Gross Domestic Product (GDP) expansion as important data were still being evaluated.

"We are sure, though still being conservative, in saying that the first quarter's GDP stands at over 4 percent," he told a media briefing after the central bank's board of governors meeting.

He identified strong exports and domestic consumption as the growth's key factor.

"Looking at the recent positive developments, we have adjusted the predicted 4 percent year-on-year GDP growth to over 4 percent," he said.

He said the forecast for 2000 GDP growth would be over 4 percent as well.

Lower imports and stronger exports have widened Indonesia's trade surplus, providing good ground for the country's GDP.

The country's stronger exports are supported by higher oil and gas prices and a sharp increase in the volume of non-oil and gas products which the country produces for the overseas market.

On the domestic consumption side, there was strong growth, particularly in the industrial and utility sectors (electricity, water and gas), deputy director of research, economy and monetary policy Halim Alamsyah said.

He also stressed domestic consumption and exports as the key factors behind the stronger-than-expected economic growth.

"It is important that our imports are in no way disturbed. Imports are necessary so that in turn we can export," he said, referring to the piles of imported goods awaiting dispatch from Jakarta sea port due to technical problems.

Achjar added that BI saw Indonesia's macroeconomic developments were on the right track, with interest rates being kept low and inflation rates under control.

The inflation rate in April stood at 0.56 percent, lower than the predicted 1 percent.

BI will not change its targeted inflation rate of between 3 percent and 5 percent for 2000 despite rises in civil servant pay, Achjar confirmed.

"We will continue to exert our efforts to maintain price stability as it is important for economic growth," he said.

The rupiah exchange rate against the U.S. dollar, however, has been depressed lately. Achar said this was due to negative sentiments created by the postponement of the International Monetary Fund's loan disbursement as well as the downgrading of the country's foreign currency credit rating due to technical issues.

"But we think such negative sentiments will soon be neutralized as a new letter of intent is on the way," he said.

The rupiah depreciated 4.3 percent against the American dollar in April.

Another factor behind the rupiah's depreciation against the dollar, Achjar said, was the strengthening of the U.S. economy. He explained that this had made the dollar gradually fare better against other major world currencies.

Halim said BI would be taking a "tight biased" position for the next month and was going to reduce the excess liquidity of rupiah from the market to further ensure its value stabilizes against the greenback.

He said, however, that negative market sentiments had played a major role in the depreciation of the rupiah against the dollar.

"The depreciation of the rupiah has lately been too much due to nonfundamental issues," he added. (udi)