SCMP:Indon economy shrank est. 16pc in fiscal '98; inflation tipped to plunge (fwd)

[Robert Weissman <rob@essential.org>]

South China Morning Post
Wednesday??March 17??1999
*Indonesian economy shrank est. 16pc in fiscal '98; inflation tipped to
plunge
AGENCE FRANCE-PRESSE in Jakarta
The crisis-battered Indonesian economy shrank an estimated 16 per cent last
financial year but is forecast to bottom out in the first half of the new
year, starting next month.
The estimates, contained in a new government letter of intent to the
International Monetary Fund, also said inflation, running at an estimated
66
per cent last financial year, should slow to the 15-to-20 per cent range
this
year.
"Our central projection is for real GDP in 1999-2000 [is] . . . about
unchanged [at zero per cent], based on the expectation that the economy
will
bottom out during the first half of the . . . year, and that a modest
recovery
will begin thereafter," the letter said.
But it warned that "a number of domestic and external risks apply to this
outlook, and the macroeconomic framework will need to be reviewed regularly
to
ensure that policies remain consistent as the outlook evolves".
On June 7, Indonesia will hold its first general elections since the fall
of
former president Suharto and political tension has begun to rise in the
run-up
to the polls.
The letter of intent said "careful management" of the rice situation had
brought down prices of the basic food staple, and that public stocks of
rice
were adequate and would be boosted by contracted import deliveries.
Although seven to eight million families had benefited from a decision to
double the subsidised rice ration to the most needy, the social impact of
Indonesia's crisis "is serious and of great concern", the letter said.
"Urban areas, especially in Java, have been the worst hit," it said, with a
considerable rise in unemployment and a substantial decline in real wages.
The letter said that in this financial year Indonesia's balance of payments
was expected to improve steadily, with export growth contributing to a
"somewhat larger" external trade surplus.
External financing from bilateral and multilateral sources for the
budgetary
programme was expected to remain strong, it said, and gross external
revenues
were expected to increase to a "more comfortable level" of about US$29
million.
In support of the objectives for the year ahead, the letter said the
government expected an agreement with external private creditors to be
reached
on a second interbank exchange offer to cover debt due this year.