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Indonesia will not reach targeted growth rate for 2001: BI

Asia Pulse - April 12, 2001

Jakarta – Indonesia is unlikely to reach its targeted 4.5 percent to 5 percent economic growth rate in 2001 on account of lower-than-expected economic activity and investment, deputy governor of Bank Indonesia Achjar Iljas predicted here Wednesday.

"Judging from current trends in economic activity and investment, the country's economy will grow at a rate of less than the 4.5 percent – 5 percent projected at the beginning of the year," Iljas said.

He said the slower-than-projected growth would be caused by a number of factors, such as slow world economic growth, low oil prices, and the continuing suspension of natural gas production activities of ExxonMobil in Aceh.

"If the stoppage of gas production by ExxonMobil continues until the end of 2001, state finances are likely to come under heavy pressure as the shutdown will significantly reduce the state's income from the oil and gas sector," he said.

The country's economic performance in 2001 would be much better if the government was able to overcome its current big problems such as maintaining domestic socio-political and security stability and restoring its relations with the IMF.

"If the government is able to overcome security and political instability and an agreement can be reached with the IMF we may have better hopes for a speedy revival of economic activities," he said.

Achjar also said the country's inflation rate over the next three months would continue to climb. This was discernible from inflationary trends prevailing during the first three months of this year, developments in the rupiah's exchange rate and the government's pricing and income boosting policies, he said.

He said conditions would be helped if the government could stabilize its relations with the IMF. "Smooth relations with the IMF will increase our capapability to bring about foreign exchange sterilization," he said.

He said good relations with IMF would also ensure the availability of foreign exchange needed to service the country's foreign debt which would total US$800 million over the next nine months.