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.

Before it's here, it's on the Bloomberg Terminal.