Inflation predicted over 7 percent

Inflation predicted over 7 percent

JAKARTA (JP): The country's inflation rate will increase to
more than 7.4 percent this year from 6.47 percent last year
despite the currency turmoil and drought, chief of the Central
Bureau of Statistics, Soegito, predicted yesterday.

"If we seriously take care of the food problem caused by the
drought, I predict inflation will not reach 10 percent, but will
stay around 7 percent," Soegito said yesterday after meeting with
President Soeharto.

He compared the current crisis to a similar one in 1991, when
the country's economy was affected by a long drought and tight
monetary policy. The crisis did not affect the inflation rate
then, he said.

During the 1991 drought, the inflation rate in the fourth
quarter was 2.01 percent, he said.

"When the government imposes a tight monetary policy,
consumption declines. With high interest rates, people would
rather save money in banks than spend it, " he said.

Minister of Finance Marie Muhammad told 20 international fund
managers last week that cumulative inflation for the first three
quarters reached 5.37 percent and was slightly higher than the
same period last year.

Marie said that inflation would still be held below 10 percent
for the year, even if there would be a slight increase in the
consumer price index in the last quarter.

Soegito predicted that economic growth would be down to about
7 percent this year from 7.98 percent last year.

The bureau released yesterday the 1996 statistics of
businesses in the country.

According to the bureau, small-scale businesses with less than
five employees dominated the business sector.

These made up 93.39 percent of all businesses, with about 10.2
million.

Businesses with between five and 19 employees made up 5.87
percent of the total, while those with between 20 and 99 workers
had 0.64 percent.

There were only 10,900 businesses, or 0.1 percent, with 100 or
more employees. (das/prb)