Habibie believes economy starting on road to recovery
Habibie believes economy starting on road to recovery
JAKARTA (JP): President B.J. Habibie said on Thursday
Indonesia's recession-hit economy was rising from its nadir and
heading toward recovery.
He said with the stabilization of the domestic political
situation, the pace of economic recovery would accelerate.
"After about a year, economic recovery efforts have shown
indications that Indonesia's crisis-hit economy has recovered
from its lowest point and started to pick up," Habibie said in a
speech at the opening of the Indonesian Importers Association
congress.
Habibie, who has been named Golkar's candidate for the
presidential election in November, faces a serious challenge in
the election from popular opposition leader Megawati
Soekarnoputri.
Habibie pointed to improving economic indicators, as reflected
in positive economic growth in the first quarter of the current
fiscal year, deflation over the past three months and a stronger
rupiah as signs of economic recovery.
"It is estimated Indonesia's economic growth this year will be
between zero and 2 percent," he said.
Habibie also said this year's inflation target of around 10
percent was attainable.
Economic ministers earlier projected inflation for the year
would be between 10 percent and 13 percent.
Habibie said with inflation under control and the
strengthening of the rupiah against the U.S. dollar, domestic
interest rates could drop to below 20 percent by the end of the
year.
Bank Indonesia has said the benchmark interest rate on its
one-month SBI promissory note could range between 17 percent and
20 percent by the end of the year.
Indonesia's economy was badly hit by the currency meltdown
which began in August 1997. The economy contracted 13.64 percent
in 1998, causing millions of people to lose their jobs. Inflation
last year jumped to 77.63 percent, eroding people's purchasing
power. Interest rates skyrocketed to more than 70 percent in
August last year and the rupiah plunged to a low of around Rp
17,000 against the dollar, causing severe problems for banks and
the corporate sector.
The economic crisis helped force Soeharto to hand over the
leadership of the country to his handpicked successor, Habibie.
Habibie attributed the improved economic conditions to his
administration's economic and political policies.
He said, as an example, the June 7 general election, which was
hailed by foreign observers as fair and honest, had heartened
financial markets.
The rupiah and local stocks have rallied following the
landmark elections, which were held without the widely feared
unrest.
The rupiah, which was around Rp 8,500 before the polls, has
risen past Rp 7,000 against the dollar. The Jakarta Stock
Exchange composite index is now testing its peak level recorded
in July 1997.
In the foreign-exchange market, the rupiah, boosted by the
country's orderly elections, held firm at 6,765 on Thusday to the
dollar in late trading, its closing level on Wednesday, despite
profit-taking in the stock market.
The Jakarta Stock Exchange composite index dropped to 682.11
from 700.66 on the previous day.
"The stable political condition should be maintained and
improved so the economic recovery can accelerate," Habibie said.
Separately, Coordinating Minister for Economy, Finance and
Industry Ginandjar Kartasasmita said on Thursday the benchmark
interest rate could fall below 20 percent next week on improving
economic indicators.
He said before a meeting with Habibie that lower interest
rates were crucial to economic recovery.
Bank Indonesia lowered its benchmark interest rate on
Wednesday to 20.34 percent from 22.50 percent.
Ginandjar also said inflation for June could be negative or
zero because some prices were still on the decline. (rei/prb)