There is no doubt that the economy has bottomed out. Indonesia's economy crept back into the black in 1999 - but only just - as political instability and a standstill in crucial bank restructuring continued to bite into gross domestic product output.

Indonesia's economy grew 0.23 per cent in 1999, after a period of contraction since the outbreak of the monetary crisis in mid-1997, and is expected to expand by some four per cent in 2000.

Last year’s incipient recovery was mainly driven by domestic consumption. The driving factors included a 1.5 per cent rise in household consumption and a 0.7 per cent rise in government expenditure.

In the fourth quarter of 1999, the country's gross domestic product rose 0.91 per cent from the previous quarter, but was 5.76 per cent higher than that a year earlier. The first quarter of this year is expected to see GDP rise 3.68 per cent from the fourth quarter last year.  But higher-than-expected growth in the fourth quarter does give cause for optimism and proves Indonesia's recovery has begun.

But with a weak banking system and Indonesian companies still mired in billions of dollars of debt, the question is whether President Wahid's government can make the recovery sustainable. Recovery will hinge on the success of corporate and bank restructuring,

The budget indicates greater household and government spending will be the main factors driving growth. The financial services sector for 1999 contracted by 8.7% from a year earlier. The statistics bureau didn't give a reason for the slump, but the figure isn't surprising given the virtual standstill in government-driven bank restructuring last year amid a damaging scandal linked to PT Bank Bali.

The manufacturing industry - for domestic consumption - managed to post the most growth in the fourth quarter, driven by a demand for goods for the Christian and Muslim year-end holidays. The statistics bureau said manufacturing output grew 2.8% in the fourth quarter from the third, and 9% from a year ago. The growth in the manufacturing industry created a ripple effect for other sectors, including transportation and trading.

Overall investment contracted 21% in 1999 from a year earlier. By sector breakdown, mining activity contracted by 0.1% for the year, but was up 0.2% in the fourth quarter compared with the fourth quarter of 1998. Mining output was up 6.0% in the fourth quarter from the third.

Construction output grew 1.2% in 1999, but was up 3.7% in the fourth quarter from a year ago and 2.5% compared with the third quarter. Trading, hotel and restaurant activity contracted by 1.1% in 1999, but was up 14.3% in the fourth quarter on year and up 3.9% from the third quarter.

Agricultural output contracted 2.9% in the fourth quarter from a year ago, and by 9.8% in the fourth from the third quarter. For the year as a whole, agriculture output was up 0.7%.  The recent slump in agricultural output was due to seasonal factors, there being no harvesting of crops during the fourth quarter.

Low consumer confidence amid political uncertainty over the past couple of years has hiked the private savings rate in Indonesia and that greater stability will prompt those Indonesians to start spending again. But this will only drive growth to a certain level, adding that real sustainable growth will only materialize when companies manage to restructure debt and banks begin lending again.

The economy also remains susceptible to political uncertainty, as manifested in a slide in Jakarta stocks and the rupiah due to rumors that the military was planning some sort of retaliation against Wahid's government in the wake of suspension of Gen. Wiranto from the Cabinet. This is despite the fact that senior military and government officials have repeatedly dismissed any chance of a coup or other form of concerted military action against the government.