Rizal sees economy growing 4% in 2002
Rizal sees economy growing 4% in 2002
Tantri Yuliandini, The Jakarta Post, Jakarta
Former coordinating minister for the economy Rizal Ramli said on Wednesday that despite the global economic slowdown, Indonesia's economic growth could still reach 3.5 percent to 4 percent next year, provided the central bank loosened its tight money policy.
"The potential to maintain recovery is quite good, but the government should use stimuli, whether they be monetary, fiscal, or in industry and trade, to ensure that the recovery continues," Rizal, who is also the chairman of Econit Advisory Group, said in a seminar on the 2002 economic outlook.
He said that Bank Indonesia should lower its interest rate and not worry too much about inflation, adding that inflation in Indonesia was mostly caused by fuel, electricity and other public utility price increases rather than by monetary factors.
Rizal warned that unless Bank Indonesia relaxed its monetary policy, the economy would likely only grow by 3 percent in 2002. The government has targeted the economy to grow by 4 percent next year, compared with an expected 3.5 percent this year.
Bank Indonesia has maintain its benchmark interest rate at around 17.58 percent in a bid to help lessen pressure on the volatile rupiah and curb inflation.
Many including government officials have called for a lower interest rate to help stimulate economic growth amid world slump and reduce state budget burden to cover the coupons of government bank recapitalization bonds.
Econit predicted inflation in 2002 to remain high, at 9 percent to 11 percent, against the government's projection of 9 percent.
Interest rates would also be high, at 14 percent to 17 percent, against the government's 14 percent, and the rupiah exchange rate at Rp 9,000 to Rp 11,000 to the dollar, compared with the government's estimate of Rp 9,000.
Separately, the Institute for Development of Economics and Finance (Indef) predicted that the country's economic growth would reach only 2.86 percent, sparked by the slump in the world's crude oil price, Detik.com news portal reported.
The private think tank also predicted a rupiah exchange rate for 2002 of Rp 10,922 to the dollar, inflation at 11.02 percent, and the interest rate of Bank Indonesia three-month SBI promissory notes at an average of 17 percent.
Elsewhere, Rizal said that the government should pursue debt rescheduling agreements beyond those offered by the Paris Club of creditor nations.
"Our creditors are not only those in the Paris Club; the big ones aren't even a member of the club. So if we only depended on the club (the impact) would be quite small," Rizal said, explaining that the country's largest creditors were the World Bank, the Asian Development Bank and Japan.
He stressed the need to negotiate bilaterally with the major creditors.