Ginandjar upbeat on figures for GDP, inflation in 1999

JAKARTA (JP): Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita projected on Friday that gross domestic product (GDP) growth for 1999 would be higher than the 0.13 percent predicted on Thursday by the Central Bureau of Statistics (BPS).

Ginandjar said his projection could materialize if the relatively stable current social and political conditions were maintained.

"I'm more optimistic than BPS. I think growth will be higher than 0.13 percent," he announced at his office.

"I can't say the exact (GDP) figure, but it will be between zero and 2 percent," he said.

BPS reported on Thursday that GDP grew by 0.47 percent in the second quarter of this year compared to the first quarter. If compared to the second quarter last year, GDP grew by 1.82 percent.

Based on these positive figures, BPS chief Sugito Suwito projected economic growth for the calendar year would be 0.13 percent. It had earlier forecast the economy would contract by 1.5 percent.

BPS said the positive quarter-to-quarter growth of the economy was mainly attributable to a recovery in the service sectors of trade, hotels and restaurants.

It added that the manufacturing sector had begun to show signs of recovery, posting 0.90 percent quarter-to-quarter growth.

"These are all indications that the economy is on its way toward recovery," Ginandjar said.

Indonesia's economy contracted by 13.68 percent in 1998 due to the sharp plunge of the rupiah against the U.S. dollar and skyrocketing interest rates. The economy also suffered hyperinflation of more than 77 percent.

But after nearly two years of following the International Monetary Fund's economic programs, the economy began to show signs of recovery in March, posting deflation for the first time since the crisis started in the middle of 1997. March also saw the first quarter-to-quarter growth of the GDP, as well as a strengthening rupiah and dropping interest rates.

Analysts are also forecasting a rosy economic outlook.

A senior economist at PT Bahana Securities, Budi Hikmat, said the people's increasing purchasing power would drive economic growth this year.

"An indication of stronger purchasing power is shown by the local stock market," he said, citing the rally on the Jakarta Stock Exchange which began earlier this month as investors returned to the market following positive economic and political developments.

He said Bahana projected 1 percent economic growth for the year.

The head of research at PT Vickers Ballas Tamara, Ferry Hartoyo, also painted a brighter economic picture following the latest data released by BPS.

"For 1999 we revised our GDP figure from a 4 percent contraction to a 1.5 percent contraction," he said.

Ferry, however, cautioned that the GDP figures for the first and second quarters announced by BPS were preliminary and therefore subject to revision, as happened with last year's figures.

"The revised GDP in the first half of 1998 was higher than the preliminary figures, while in the second half of 1998 the revised figured revealed a deeper contraction," he said.

Ginandjar said inflation this year could be well below the government's earlier projection of 10 percent to 13 percent.

"I think inflation (this year) could drop to below 8 percent," he said.

However, Ferry said lower prices for many commodities and an abundant supply of goods would drive inflation to as low as 6 percent for the year.

"Helped by the appreciation of the currency, we project inflation will fall to 6 percent by the end of the year. A further reduction in interest rates should keep sentiment strong and confidence in the currency high," he said.

The rupiah has appreciated sharply in recent weeks, particularly after the June 7 general election was held without the widely feared unrest. The rupiah strengthened to as high as Rp 6,600 against the dollar this week, compared to its Rp 8,100 level before the election.

The stronger rupiah has allowed the central bank to cut its benchmark interest rate to 18.84 percent, compared to nearly 30 percent in May.

Asked about the ideal level for the rupiah, Ginandjar said: "As long as the rupiah is hovering at around Rp 6,000, we'll be OK"

He said that at the Rp 6,000 level, Indonesia could solve its overseas debt problem and control inflation without hurting the competitiveness of its exports.

He added that the rupiah could be allowed to strengthen to the Rp 5,000 level as long as other regional currencies also strengthened.

Asked to comment on the recent slight weakening of the currency, he said: "We have to be accustomed to the ups and downs of the rupiah, following the market's mood.".(rei)