Indonesian Political, Business & Finance News

RI's GDP may shrink 4.1% in 1999: Poll

| Source: REUTERS

RI's GDP may shrink 4.1% in 1999: Poll

JAKARTA (Reuters): Indonesia's gross domestic product (GDP) is forecast to shrink a further 4.13 percent this year after plunging 13.68 percent in 1998, according to a Reuters poll of 10 research houses.

But its economy is forecast to recover in 2000, growing about 1.78 percent, according to the average forecast for that year.

"GDP would further contract this year as demand for goods and services would continue to fall, while investors would remain on the sidelines due to the political uncertainty," said economist Raden Pardede of Danareksa Sekuritas.

"Growth is expected to return to positive next year. The rupiah, which affects the supply side, would stabilise after the elections, provided they run smoothly," the economist added.

"The upcoming elections are so important. We expect that the elections would be smooth and fair, otherwise the impact on the economy would be devastating," said economist Budi Hikmat of Bahana Securities.

Indonesia is to hold polls in June to elect parliamentary members who will elect a president and a vice president around November.

The elections are among reforms aimed at setting the world's fourth most populous nation on the path towards democracy after 32 years of autocratic rule under disgraced former president Soeharto.

Soeharto was replaced by his protege B.J. Habibie in May 1998, amid widespread civil unrest and the worst economic and social crisis in decades.

The Central Bureau of Statistics has said GDP growth would be between minus two percent and plus 1.5 percent in 1999. It has given no forecast for 2000.

In December, analysts forecast an average GDP contraction of 5.8 percent in 1999.

They said they were now more optimistic because of the rupiah's relative stability against the dollar over the past few months.

"We have seen less rupiah volatility in the past few months compared with what had happened in the middle of last year," said one analyst who asked not to be named.

"This development had helped improve sentiment."

Table A: Past GDP performance

1994...........7.5% 1995...........8.2% 1996........,,,7.8% 1997.......... 4.6% 1998...minus 13.68%

Table B: The results of the survey

1999 2000 ING Baring Securities -4 2.1 Bahana Securities 0 to -2 4-5 Citibank, N.A. -3 0 to 1 G.K.Goh Ometraco -5.7 2.8 European brokerage -6.2 2.8 HSBC Securities -6 -0.3 Merrill Lynch Indonesia -3.4 1.5 Danareksa Sekuritas -3.2 1 to 2 Pentasena Arthasentosa -3.3 0.9 Warburg Dillon Read -5.5 1.5 ---------------------------------------------------- Average -4.13 1.78

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