Catalog

	Table of Contents
p. 42 of 44 BACK | NEXT Country Reports East and Central Asia Mekong Pacific South Asia Southeast Asia Indonesia Malaysia Philippines

Annual Report 2002 : Southeast Asia

---

Indonesia

Economic performance

Indonesia recorded GDP growth estimated at 3.7% in 2002. This growth was accompanied by macroeconomic stability and largely sustained by consumption expenditure, which in 2002 was 4.7% above levels in 2001, and offset the impact of a slower world economic recovery and a continuing decline in investment. The economy received a setback from the terrorist attacks in Bali in October 2002. The currency and stock markets reacted sharply to the attacks, but recovered quickly as the Government took steps to ensure security. By sector, manufacturing recorded growth of 2.8% through 2002, with utilities and some services sectors also recording strong growth, although slowing during the year. Agriculture grew at 2.3% through the year, up from the 0.7% growth in 2001. Exports and imports declined in 2002. Indonesia sustained fiscal consolidation and reduced the budget deficit to 1.7% of GDP in 2002, lower than the targeted 2.5% of GDP. Lowered fuel subsidies contributed to reducing the fiscal deficit.

Indonesia’s budget since the 1997 Asian economic crisis has been bearing a high fiscal burden of servicing government debt. Interest payments on government debt were equivalent to about 5.3% of GDP in 2002. Nevertheless, with rupiah appreciation and nominal GDP increases, government debt:GDP ratios declined from 98% in 2000 to about 72% at end-2002. The rescheduling of foreign debt under Paris Club and London Club arrangements, the restructuring of some domestic bank recapitalization bonds, and the launching of a government securities market made future debt repayment more manageable.

Inflation stabilized at about 10% in 2002. The rupiah appreciated and interest rates declined. Official data indicate an increase in the number of unemployed from 8.1 million to 9.1 million in the 12 months to August 2002. The unemployment rate was estimated at 9.1%.

ADB operations

Operational strategy: ADB’s strategy focuses on improving governance by emphasizing anticorruption and legal and judicial reform; introducing a geographic focus in operations; and identifying local development partners that prioritize good governance and poverty reduction. It also promotes human development; and aims to mainstream environmental management and encourage sustainable use of natural resources. Poverty-reducing growth is encouraged through investments in infrastructure, strengthened corporate governance, and expanded private sector development.

Policy dialogue: ADB played a lead role in coordinating the Consultative Group for Indonesia working groups on education and aid effectiveness. Program loan implementation, and the formulation of new program loans also involved extensive policy dialogue on financial governance, industrial policy and development of small- and medium-sized enterprises, and energy policy.

Loans, technical assistance, and grants: Seven loans totaling $767.2 million were approved in 2002 to help increase poor farmers’ incomes, rehabilitate and manage coral reefs, build capacity for decentralization, reform financial governance and social security, develop export-oriented SMEs, support renewable energy, and improve the power transmission subsector. Twenty-seven technical assistance totaling $19.1 million and two grants totaling $12.0 million were also approved (see tables 1, 6, 7, 24, 25, and 35 in the Statistical Annex).

Project implementation: Since joining ADB in 1966, Indonesia has received 263 loans totaling $19,096.2 million, of which 62 were active at the end of 2002. Contract awards in 2002 totaled $1,121.4 million, bringing the cumulative figure to $12,348.8 million. The contract awards ratio was 34.4%—higher than ADB’s average of 22.6%. Disbursements in 2002 totaled $1,000.5 million, bringing cumulative disbursements to $13,061.5 million. The disbursement ratio was 29.9%—higher than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

Back Southeast Asia	Next Malaysia