RI key to regional economy: Goh

RI key to regional economy: Goh

SINGAPORE (Agencies): Singapore Prime Minister Goh Chok Tong said regional economies have improved, but they are unlikely to recover fully until Indonesia overcomes its financial crisis.

Goh, speaking at the opening of a community center late Saturday, said the region would grow at four to six percent per year in the medium term, but faced up to four years of pain from economic crisis.

"Things have improved in Malaysia and Thailand, but their complete economic recovery will be faster if the Indonesian economy also turns the corner," Goh said.

Goh said the recovery of the Indonesian economy hinges on its efforts to stabilize its rupiah currency, which has lost some 76 percent of its value over the past eight months.

The plunging rupiah has caused prices of imported goods to skyrocket, sparking widespread social unrest.

"Indonesia is trying hard to stabilize the rupiah. Until this is done, the Indonesian economy will not get better," Goh said.

Attempts to stabilize the currency depend on the outcome of talks between the Indonesian government and the International Monetary Fund (IMF) over IMF-mandated economic reforms.

The IMF is withholding a second three billion dollar installment of a US$43 billion bail out package for Indonesia pending progress on economic reforms agreed to in January.

Goh predicted that Southeast Asian economies would grow again after two to four years of painful adjustment.

"Maybe not as vigorously as before, but growth rates of about four to six percent are certainly possible in the medium term," Goh said.

Growth had been in, or close to, double digits in most of the countries hardest hit by the regional economic turmoil.

While Singapore was less affected by the crisis than Indonesia, Malaysia or South Korea, Goh said the strong linkages between the regional economies meant the effects were still felt in the city state.

"Singapore must live with slower economic growth and lower wage increases over the next few years," he said.

Last month Singapore cut its official 1998 economic growth forecast for the year to between 2.5 and 4.5 percent from a previous estimate of five to seven percent.