Government amends GDP growth forecast to 2 percent
Government amends GDP growth forecast to 2 percent
JAKARTA (JP): The government is revising its economic growth
forecast for the 1999/2000 fiscal year to 2 percent from an
earlier flat projection amid convincing signs of economic
recovery, according to a senior government official at the
Ministry of Finance.
The official, who declined to be named, said the more bullish
estimate was based on the fact that many economic indicators were
now looking good.
"The IMF has also said economic sectors that contracted last
year have now posted positive growth," he told The Jakarta Post
after a meeting with senior economic ministers and officials from
the International Monetary Fund (IMF) on Friday.
The source also said that inflation for the fiscal year was
projected to be between 8 percent and 10 percent, compared to
earlier forecasts of less than 10 percent.
The government and the IMF started discussions on Friday on
the country's next letter of intent to the Fund. The talks are to
include Indonesia's revised macroeconomic forecasts.
The IMF's Asia Pacific director, Hubert Neiss, is expected to
come to Jakarta this month to join the final rounds of the talks.
The signing of the new letter of intent will pave the way for
the disbursement of further loans from the IMF, which has a
commitment to providing US$12.3 billion to finance the country's
economic reform programs.
Bank Indonesia deputy governor Subarjo Joyosumarto
acknowledged on Friday that the government was revising its
macroeconomic assumptions.
He declined to disclose the new assumptions, saying they were
not yet final.
Indonesia's economy has continued to show convincing signs of
recovery.
Gross domestic product grew by 1.82 percent in the second
quarter of this year compared to the same period of 1998 as
various economic sectors, including agriculture, mining,
services, manufacturing and construction, started to grow.
The economy contracted by 13.68 percent last year.
Inflation in June was negative 0.34 percent, the fourth
deflation month for four consecutive months. Inflation
skyrocketed to more than 77 percent last year at the height of
the economic crisis.
The central bank benchmark interest rate has also dropped to
17.15 percent, compared to last year's 70 percent.
The rupiah has been hovering at around Rp 6,700 to the dollar,
compared to more than Rp 14,000 last year.
The government source said the benchmark interest rate was
expected to further decline to around 12 percent to encourage
banks to resume and thus stimulate economic growth.
Meanwhile, another Bank Indonesia deputy governor, Miranda S.
Goeltom, said the benchmark interest rate should fall to around
15 percent later this month.
She expected that banks could start lending in August,
pointing out that it would no longer be profitable for banks to
keep their third-party funds in central bank promissory notes due
to the declining interest rate.
Indonesia's banking sector has been badly hit by the economic
crisis. The high time-deposit rates and piles of non-performing
loans has made banks suffer negative interest rate spreads. Banks
had to invest their third-party funds in central bank paper notes
offering high rates as no businesses could afford the high cost
of borrowing.(rei)