Aid to Jakarta was suspended during last month's political upheaval. The move by the World Bank follows predictions of further serious economic problems in Indonesia as the effects of the recent unrest work through.

According to a new government report, the economy is likely to end the year in much worse shape than had previously been thought.

Gloomy forecast

• The economy is expected to shrink by 10% this year - with construction and manufacturing hit particularly hard

• Inflation is predicted to reach at least 80%

• Unemployment is forecast to rise to around 17% of the workforce

Correspondents say the unemployment figures are especially worrying for the new government, and the current official total of around 15 million is almost certainly too low.

Many companies which ran into difficulties earlier in the year delayed laying off their employees as long as possible. Those who did lose their jobs were often helped out by close relatives. The new economic realities are partly a consequence of those lifelines being gradually being exhausted.

Nevertheless, the International Monetary Fund has praised the capabilities of the government's new financial team, and its apparent appetite for reform. However, most forecasters say it will be at least a year before Indonesia starts to see any real improvements in its economy.

Union recognition

The new government is pressing on with radical new measures to open up the country.

The union's leader was freed from prison last month

The Indonesian Manpower Minister, Fahmi Idris, says his government is going to recognise the country's largest independent labour union, which had been suppressed under former President Suharto.

Mr Idris said the decision to allow the Independent Workers' Welfare Union to operate as a legal organisation was part of the government's efforts to restore confidence within the country and abroad.

During the Suharto era, human rights groups criticised Indonesia for suppressing workers' rights and allowing bosses to pay unfair wages.

The union's leader, the dissident Muchtar Pakpahan, was one of the political prisoners released by the government recently.