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)