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.