RI expected to maintain high growth

RI expected to maintain high growth

JAKARTA (JP): Indonesia will probably maintain its high
economic growth rate next year despite the growth of its current
account deficit, a senior minister has forecast.

State Minister for National Development Planning Ginandjar
Kartasasmita told a seminar here on Tuesday that the economic
growth rate will remain high next year, possibly above the 7.1
percent level set in the government's current sixth Five Year
Development Plan (Repelita VI) period.

"And it will not differ very much from the growth in 1994 and
1995," Ginandjar said. He added that this year's growth rate is
expected to exceed last year's level of 7.34 percent.

Domestic consumption and investment will remain the main
engines for next year's economic growth, Ginandjar noted.

However, he said, the growth of domestic consumption and
investment in 1996 will probably remain below this year's level
as a result of the tightening of bank credits and the declining
competitiveness of the country's exports.

In addition to the growth rate, Ginandjar also forecasted that
next year's inflation rate will possibly decline a little bit
from this year's level of about 8.5 percent.

"If we look at the trend during the last three years, it shows
that the inflation rate tends to decline though slowly,"
Ginandjar said.

He suggested that the National Logistics Agency work harder to
control the increases of food prices, which have contributed
significantly to the country's inflation rate.

Last year, for instance, food prices increased by 14 percent
and this year by 11.6 percent.

Although the inflation rate is projected to decline in 1996,
the current account deficit is projected to expand further next
year as a result of strong pressures from rising imports.

During the January-August period of this year, exports grew by
18.4 percent, as compared with 15 percent during the same period
of last year, while imports grew much more, by 28.9 percent.

Ginandjar noted that this year's high growth of imports was
fueled, among others, by increasing domestic consumption as well
as investment activities.

Current account

"Barring some drastic changes in our export and import scheme,
it is unavoidable that our current account deficit will worsen
next year," he said.

A number of experts have voiced similar concern. The Econit
Advisory Group, for instance, forecasts that this year's deficit
will probably shoot up to US$6.4 billion, as compared with US$3.1
billion last year.

Ginandjar shared with other economic forecasts that next
year's current account deficit will likely reach an alarming
point of over three percent of the country's gross domestic
products (GDP). Indonesia's current GDP stands at some US$165
billion.

Next year's current account deficit, however, will be still
manageable as it will be covered by the increasing inflow of
foreign capital through direct investment, portfolio investment
and private loans, Ginandjar added.

Ginandjar, also chair of the National Development Planning
Board, noted that the large current account deficit will serve as
one of the indications toward another economic overheating.

"Actually an economic overheating is not a problem for this
year only, but it has been a chronic problem," Ginandjar told the
year-end seminar, organized by the ruling Golkar party at its
headquarters here.

Other speakers at Tuesday's seminar included Coordinating
Minister for Production and Distribution Hartarto, Minister of
Cooperatives and Small Enterprises Subiakto Tjakrawerdaya and
Chairman of the Indonesian Chamber of Commerce and Industry
Aburizal Bakrie. (rid)