HSBC cuts Indonesia's growth forecast to 3.0 percent in 2000

HSBC cuts Indonesia's growth forecast to 3.0 percent in 2000

SINGAPORE (Dow Jones): Economists at HSBC Ltd., worried about
the country's slowing exports, have cut the bank's forecasts for
Indonesia's economic growth to 3.0 percent for this year and 1.5
percent in 2001.

An analysis in the latest issue of the bank's Asian Economic
Insight, obtained Friday by Dow Jones Newswires, also expressed
concern that Indonesia's economic situation could worsen if the
cabinet "fails to agree on a coherent set of economic reform
policies, leading to significant currency volatility."

Previously, HSBC had projected Indonesia's economic growth at
4.0 percent this year and 4.5 percent for next year.

"At best," the new assessment said, "the extremely low growth
environment will persist."

It described the 3.2 percent year-on-year growth in the first
quarter of this year as "disappointingly meager" and said that 40
percent of it can be attributed to an export spurt. A high rate
of export growth "is unlikely to be sustained as global growth is
close to peaking and should drop off in 2001," HSBC said.

The report also described Indonesia's balance-of-payments
picture as "only marginally comfortable." With slowed export
growth, there will be "much greater pressure on the external
surplus and ability to service debt," it said.

The assessment, titled "Teetering On The Edge Of A Precipice",
said the possibility of a "lack of political consensus" was a
possibility that "cannot be completely ignored."

Such a lack, it continued, "could be disastrous, leading to
high rupiah volatility and rapid depreciation."

That, in turn, could be lead to "chaotic conditions and could
cause the leadership to take drastic steps including the
possibility of capital controls," the report said.