A dramatic rise in unemployment has been predicted in Indonesia in the coming year because of the country's deepening economic crisis.

A spokesman for Indonesia's Department of Manpower said the current jobless total of 2.7m could rise by as much as 1m.

The warning came as the country's currency, the rupiah, continued its steep decline amid further political speculation in Jakarta.

Record slump for rupiah

The currency slumped to another record low on Thursday amid rumours about the possible appointment of the Research and Technology Minister, Jusuf Habibe, as vice-president.

Mr Habibe has been associated with a number of big-spending projects of the kind the International Monetary Fund insisted be cancelled when a big new loan to help support the Indonesian economy was negotiated earlier this month.

Confidence among traders on the Jakarta stock market was also affected when the Finance Minister, Mar'ie Muhammad, announced that the government would not bail out Indonesian companies facing mounting debt problems. Shares slipped 5.5% in the first hour of trading.

Suharto blamed for instability

Some dealers in Jakarta have criticised President Suharto and his ruling Golkar Party for producing uncertainty which has inevitably led to financial instability.

President Suharto: unwilling to go

One institutional dealer at a European brokerage said: "The ruling party or the government should be more responsive to the market situation."

Mr Suharto, 76, rejected calls for him to retire after 32 years in power. He accepted the Golkar party's nomination for a seventh five-year term.

Economists say Mr Habibie, who has backed ambitious and costly industrial projects, is unpopular in the business community but is perceived to have the backing of the military, a key political force in Indonesia.
 

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