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Govt, House set growth target for 2009 at 6%
The government and lawmakers have set a "compromise" 6 percent target for next year's economic growth, as part of a revision to the 2009 budget assumptions
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The government and lawmakers have set a "compromise" 6 percent target for next year's economic growth, as part of a revision to the 2009 budget assumptions. This reflects the global financial crisis, projecting a possible world economic downturn.
The House of Representatives' budget committee had wanted a 5.8 percent growth target, anticipating severe negative impacts from the global credit crunch on Indonesia's economy, according to vice chairman Suharso Monoarfa on Wednesday.
The 5.8 percent would have been "more credible", but the government requested the growth target be raised to 6 percent, said Suharso.
Committee member Hasto Kristianto said that as part of efforts to persuade the committee to agree to the new target, several members were summoned late on Tuesday by Vice President Jusuf Kalla.
"It violates the parliament's rights," he said.
Kalla heads the Golkar Party which holds the largest block of seats in the House.
The government is convinced that the impact of the current crisis on Indonesia's economy will be limited and that therefore a 6 percent target for next year is manageable.
Finance Ministry's head of fiscal policy Anggito Abimanyu said a slow down in exports next year would be mitigated by higher consumption given a projected lower interest rate environment.
"We expect the (central bank's interest) rate to decline as inflation will not be as high as this year's. With the rate declining, businesses are expected to be able to expand," Anggito said.
Inflation is expected to be lower next year, at 6.2 percent, supported by a decline in the prices of commodities.
Exports would probably be the first to suffer negative impacts from the current global crisis, since the United States, one of the world's largest importers, is on the brink of a recession.
However, as Indonesia will have general and presidential elections in 2009, robust consumption is expected to be triggered by the retail sector, Anggito said.
In the first half of 2008, the economy grew by 6.4 percent growth, the Central Statistics Agency (BPS) reported. BPS will release the data on the country's economic growth in the third quarter of 2008 next month.
Anticipating relatively low inflation, the central bank's interest rate has been targeted at 7.5 percent for next year. The central bank raised its rate to 9.5 percent early this month to curb inflation.
On year inflation in September stood at 12.14 percent, according to BPS.
On the budget deficit, Suharso said that with 6 percent economic growth, the deficit would be set at 1 percent of GDP. "Foreign loans will provide secondary reserves. Deficit financing will be obtained mainly from government bonds and local banks."
