IMF predicts higher than 4% growth for Indonesia

JAKARTA (JP): International Monetary Fund (IMF) director for Asia Pacific Yusuke Horiguchi predicted on Monday that Indonesia's economy would grow by more than 4 percent this year while inflation would remain in single digits.

Horiguchi, who succeeded former IMF Asia Pacific director Hubert Neiss, said Indonesia had adopted "appropriate policies" in its efforts to get out of its economic crisis.

"Indonesia's economic growth has shown progress," Horiguchi told reporters after making a "courtesy call" on President Abdurrahman Wahid.

"We believe the economic growth of 3 percent to 4 percent is entirely within reach and could even be better, given the strength of the fourth quarter last year."

According to the Central Bureau of Statistics (BPS), Indonesia's gross domestic product (GDP) in the fourth quarter rose 0.91 percent compared with the third quarter, or 5.76 percent year on year.

Indonesia booked a better than expected GDP growth of 0.23 percent for 1999, compared to a contraction of almost 14 percent in 1998.

The bureau predicted that GDP growth this year could reach 4 percent. The Ministry of Finance predicted GDP growth of 3.8 percent.

Horiguchi also said he was confident inflation would remain low at below 10 percent despite a planned increase in wages, fuel and electricity rates.

The House of Representatives and the government have agreed to raise fuel prices by 12 percent and electricity rates by 29.43 percent starting April 1. Meanwhile, labor wages are expected to be raised by between 5 percent and 55 percent across the country starting April 1.

"We have incorporated those factors in our inflation forecast. The inflation picture will continue to be favorable," he said, adding that the increase would have no lingering impact if economic policies were right.

The bureau reported on Monday that Indonesia's inflation increased by a lower than expected 0.07 percent in February from January. The inflation rate in January was 1.32 percent.

Inflation for all of 1999 was only about 2 percent, compared to a staggering 78 percent in 1998.

Horiguchi said Indonesia's economy, along with those in Thailand, South Korea and the Philippines, was beginning to escape its problems.

He noted that his meeting with Abdurrahman was to introduce himself as the new IMF director for Asia-Pacific, replacing Neiss.

He also said he wanted to show the goodwill of the IMF toward Indonesia despite the occasional differences.

"Quite often on a day-to-day basis we have difficult discussions, tense discussions and so forth," Horiguchi said.

"But I do not want that to (overshadow) the underlying positive attitude of the international community and the IMF toward the democratically elected President and his government and their efforts to do the right thing for the people of this country."

Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said Horiguchi was in Jakarta leading a technical team from the IMF to review Indonesia's economic programs, especially those incorporated in its letter of intent to the IMF.

The review is a condition before the IMF releases the next disbursement of loans to the country. (prb/rid)