RI sees 'strong' growth this year

RI sees 'strong' growth this year

FUKUOKA, Japan (Agencies): Finance Minister Mar'ie Muhammad said yesterday Indonesia's economy was likely to expand at a rapid pace this year with little sign of overheating.

"We are confident that the economy will again register strong economic growth in 1997," he told the annual meeting of the Asian Development Bank (ADB), citing the positive impact of recent deregulatory steps.

While Indonesia's gross domestic product (GDP) grew at a real annual rate of 7.83 percent over the past six years, he noted that consumer price inflation had fallen to 5.17 percent in fiscal year 1996/97, the lowest level in 12 years.

"Despite the strong expansion, the Indonesian economy has shown few signs of overheating," he said.

Mar'ie also noted that Indonesia was still viewed as a "prime location" for foreign direct investment with approvals reaching US$29.9 billion in 1996.

"The implementation of new investment projects for which these funds are targeted will create substantial new industrial capacity that will help us meet the demands of our growing domestic market as well as creating additional export capacity," the finance minister said.

"In large measure, these flows are a response to our ongoing deregulation policies which have increasingly made Indonesia an attractive investment destination," he added.

The minister said Indonesia's current account deficit could be "readily managed" at around four percent of GDP.

Mar'ie added the Indonesian government wanted to prepay expensive loans from the ADB by using funds earned from privatization.

"The government of Indonesia is firmly committed to fully honoring all of its international financial obligations. Indeed, the government will continue to prepay the high-cost loans from the Asian Development Bank by utilizing the proceeds of funds raised by our ongoing privatization programs and budget surpluses," he said.

Meanwhile, Bank Indonesia's governor Soedradjad Djiwandono said here yesterday that he was worried about the recent rise of the yen against the dollar, as much of the country's external debt is denominated in yen.

"We are concerned (about the rise of the yen) partly because our exposure for government debt to the Japanese yen is high, maybe close to 40 percent," Djiwandono told Reuters Financial Television in an interview.

He also said the rupiah had depreciated three to five percent a year since the early 1980s, and said he has been "comfortable" with the depreciation.

"When we talk about the depreciation of the rupiah, it's part of our efforts to support the export drive to help our competitiveness in exports," he said.

Djiwandono said there is room for lower interest rates in Indonesia when inflation is under control. "Once inflation is under control, room for lower interest rates is there," he said.

However, interest-rate trends in major nations such as the United States are complicating Indonesia's moves on interest rates.

ADB -- Page 10