RI's economy to start growing in 2000: Mari

RI's economy to start growing in 2000: Mari

JAKARTA (JP): Fallout from domestic political turmoil rules
out the country returning to the growth track before 2000, noted
economist Mari E. Pangestu said on Wednesday.

The executive director of the Center for Strategic and
International Studies added that the country would record
negative growth next year of between minus 2 percent and minus 5
percent.

"As we have to balance social and economic concerns, our
recovery will be very slow. We need at least three to four years
to reach a normal situation, that is growth of 6 percent per
annum," she said at a year-end news conference.

Mari used the occasion to bid farewell to journalists as she
will join her husband in the U.S.

Economic recovery in Indonesia will depend heavily on inflow
of private capital but it would not come during a crisis, she
said.

"We are experiencing a crisis in leadership -- a crisis in
political leadership, a crisis in economic leadership and a
crisis in military leadership."

Even if all political plans go according to schedule, real
private investment will not enter Indonesia until a new
government is formed by the end of 1999.

Prospective foreign investors prioritize policy consistency
and credibility of a new government in making their choices, Mari
said.

Policy consistency would not be a major issue in the near
future because Indonesia's economic policy would still be steered
by the International Monetary Fund, which arranged a multibillion
dollar bailout for the country.

In terms of government credibility, Mari said foreign
investors would act on cues from domestic investors. Once
domestic investors started to invest, foreign investors would
follow suit.

Mari acknowledged that Indonesia's macroeconomic health was
improving, with falling interest rates and inflation and a steady
rupiah.

"But that could not yet serve as a foundation for growth as
there are still great uncertainties in the real, financial and
political sectors."

Mari believed inflation would fall next year, but it would
still be in double digits and higher than the government's target
of between 10 percent and 15 percent.

The rupiah exchange rate would remain stable at the current
level or even strengthen toward March 1999, the end of this
fiscal year, because official funds would continue to flow in.

She warned that rupiah stability would be in danger once
corporations started to repay their loans.

The currency has stabilized in very thin trading on the
foreign exchange market. Once large demand arises, Mari cautioned
that the local unit would be easily pushed down.

"Therefore, it is very important to solve this private debt
hangover."

Indonesia's private corporations owe more than US$60 billion
to foreign creditors.

Economist Pande Raja Silalahi said the problem of foreign
exchange would continue to loom in the immediate future because
the government would still need about $10 billion to $14 billion
in foreign aid next fiscal year to finance deficits in the State
Budget.

It will not be easy for the government to get that amount as
it has drained a huge amount of creditors' money this year.

Spending from State Budget will become a prime mover of
economic activities next year because bank lending would still
minimal.

Pande contended that most of third party funds in the
country's banking industry were short-term at less than one-month
duration.

"Therefore, it is of the utmost important to restore public
trust in the banking system." (rid)