The government says the economy in 2009 may still expand by 6.2 percent because robust domestic factors, partly propelled by the general elections, will offset negative impacts from the continued global economic slowdown.
"If the world's economy is worsening, (Indonesia's economic) growth (next year) could downsize. However, as domestic economic factors will improve in 2009, the economy may still grow by 6.2 percent," Finance Minister Sri Mulyani Indrawati told reporters last Friday.
Indonesia will hold the general and presidential elections next year.
As experienced during the last general elections in 2004, the election year in 2009 will push domestic demand up significantly -- providing opportunities for micro-enterprises and SMEs to open and expand businesses, so stimulating the economy.
This year, government predicts economic growth at between 6.3 percent and 6.4 percent, with inflation as the main risk that may hamper growth, Sri Mulyani said.
Inflation in August rose 11.85 percent from a year earlier, according to the Central Statistics Agency (BPS). The full-year inflation figure has been predicted by the government at 11.2 percent, close to the 11.5 to 12.5 percent range predicted by the central bank.
Sri Mulyani said Indonesia's economy remains fundamentally strong despite threats from inflation, as seen by the fairly strong 6.4 percent growth booked in the first semester.
"Our growth potential remains strong. Also inflation may ease due to the drop in commodity prices," she said.
Analysts say that Indonesia needs to grow at least 7 percent to enable significant reduction of unemployment and poverty.
Sri Mulyani also said the budget deficit in 2008 might be lower than the government's initial estimate of 1.9 percent, or Rp 90.6 trillion (US$), due to the weakening rupiah and the drop in global oil prices.
Crude oil prices have dropped about US$50 from record peaks above $147 on July 11. On Friday, in London, Brent North Sea crude for October dipped 6 U.S. cents to settle at $97.58, AFP reported.
The rupiah fell last week by 0.7 percent against the dollar to close at 9,445, as reported by Bloomberg.
On the government's spending, which has been lagging behind schedule so far this year, Sri Mulyani said she had ordered the directorate general of budgetary affairs and the directorate general of state treasury to disburse funds.
"Civil servants' salary bonuses ahead of the Idul Fitri holiday and the general allocation funds (DAU) are to be disbursed immediately," she said.
DAU is a fund set aside by the government for regional governments.
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