PECC forecasts 4.4% growth in 18 countries

PECC forecasts 4.4% growth in 18 countries

JAKARTA (JP): The Pacific Economic Cooperation Council (PECC)
forecast yesterday that the economies of 18 Asia-Pacific
countries are growing stronger this year, with estimated average
growth of 4.4 percent, as compared to 3.5 percent in 1993.

The chairman of PECC's team for the Pacific economic outlook,
Lawrence Krause, said during a seminar yesterday that the
economies will likely grow by an average of 4.2 percent next
year.

He said the updated version of PECC's Pacific Economic Outlook
1994-1995 predicts that the average growth rate of the developing
nations in the region -- excluding the United States and Japan --
is even higher, with an estimated average growth of 6.4 percent
this year and 6.2 percent next year.

However, Krause warned of the imminent danger of rising
inflation as a result of the rapid economic growth in the region.

"We should be watchful with the rising inflation, one of the
economic factors which will potentially bring political
instability," Lawrence said.

The 18 economies included in PECC's forecast report are
Australia, Canada, Chile, China, Colombia, Hong Kong, Indonesia,
Japan, Korea, Malaysia, Mexico, New Zealand, Peru, the
Philippines, Singapore, Taiwan, Thailand and the United States.

Krause said the estimated growth rate for 10 of the economies
was marked up in the updated report, half of them by significant
amounts of 0.5 percent or more, while the estimated growth rates
of two countries, Japan and Mexico, were reduced. The forecasts
for Colombia, Peru and Taiwan were not updated.

The Japanese forecast for this year, after being lowered from
1.1 percent to 0.7 percent, stands out as the lowest among the 18
economies.

China is forecast to have the highest growth rate of 10 this
year, the only economy in the double digit range. However, the
very high growth makes China bear a high inflation rate of 18.7
percent.

Indonesia

Indonesia is estimated to be in the high growth group. After
being revised upward by 0.4 percent, growth of 6.9 percent is
anticipated this year. Next year, its growth rate is estimated at
6.9 percent and in 1996 at 7.1 percent.

Meanwhile inflation in Indonesia is accelerating as well and
is likely to reach 8.4 percent this year, well above the
government's target of some five percent annually for the coming
five years. However, the inflation is predicted to fall to 7.9
percent next year and 7.8 percent next year.

Suhadi Mangkusuwondo, an Indonesian forecaster in the PECC,
said that the Indonesian forecast of high inflation is mainly
caused by this year's draught, which has caused many consumer
prices to increase, together with the steep hike of cement
prices.

He further noted that Indonesia's record of high growth is
strongly related to its exports, which have continued to increase
in recent years. In addition to exports, domestic demand also
plays a major role.

"The hikes in cement and vehicle prices indicate that domestic
demand for those commodities is very strong. And this influences
the economic growth rate," Suhadi said.

He said that Indonesia's economy is closely related to
economic trends in the Asia-Pacific region as 74 percent of its
exports go to countries in this region and 68 percent of its
imports come from the region as well.

"The ups and downs of our economy follow the trends of the
world economy, especially the one in the Asia-Pacific rim,"
Suhadi noted.

He revealed that Indonesia's economic growth registered
downturns in 1988 and 1989, after which the growth has been
increasing. "The year 1993 was the upturn of the business cycle
in Indonesia and also in the Asia-Pacific region."

Suhadi, who is also a professor in the Economics Faculty of
the University of Indonesia, predicted that 1994 and 1995 will be
vital for the country's economy.

However, he suspected that 1996 will mark the turning point of
the country's growth. "Indonesia might bear downturns in its
economy after 1996." (rid)