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)