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