Economic Developments in the Year 1998

INDONESIA ECONOMIC DEVELOPMENT

The crisis has lowered the exchange rate of Indonesia's economic growth. The rupiah exchange rate which had fallen sharply since July 1997 led to economic growth in Indonesia in the third quarter and fourth quarter decreased to 2.45 percent and 1.37 percent. In the first quarter and second quarter of 1997 Indonesia's economic growth was recorded at 8.46 percent and 6.77 percent. In the first quarter of 1998 recorded a negative growth of -6.21 per cent.

Declining economic growth can not be separated from the problem of private sector business conditions are getting slow performance. This delay occurred partly because of the difficulty of obtaining imported raw materials associated with the non-acceptance of LC Indonesia and the burden of foreign debt payments are more swollen in line with the weakening rupiah and the higher rate of bank interest. Riots that swept several cities in May 1998 is expected to further slow down the performance of private sector which in turn further reduce further economic growth, particularly in the second quarter of 1998.

Meanwhile, export growth in March 1998 showed an encouraging non-oil export growth of around 16 percent. The growth rate was achieved thanks to the price of export commodities is increasingly competitive with the falling value of rupiah. This increase contributed to the trade surplus surged to 1.97 billion dollars compared with 206.1 million U.S. dollars in March 1997. Imports fell sharply were other factors to create the surplus. Imports in March 1998 fell by 38 percent in line with declining economic growth.