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Extra Spice In Indonesia


Economic Trends

EXTRA SPICE IN INDONESIA

Rising petroleum prices and an upbeat business environment are putting zip into Indonesia's economy, reports David W. Carbon of J.P. Morgan & Co. Growth should hit 7% this year and 7.5% in 1995, he predicts.

Even without the boost from oil, Indonesia's exports have picked up recently, thanks to robust growth in the U.S. and a quickening European recovery. The coming rally in Japan will also keep the export mill humming. Japan is now Indonesia's chief overseas market, taking 30% of exports, says Carbon. What's more, Indonesia's currency, the rupiah, is down 18% against the yen this year.

On the domestic side of the economy, some $23 billion worth of foreign investment projects have been approved this year. And recent corporate tax cuts will provide a fiscal-policy stimulus.

Indonesia's biggest challenge will be to restrain inflation, which is heading toward 10% this year. In line with President Suharto's decree that inflation be kept to single digits, the central bank has already raised short-term interest rates a number of times since April.GENE KORETZ


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