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Govt spending key to growth, will be well-directed: Kalla
While remaining optimistic Indonesia’s economy will grow fairly well against the backdrop of the global economic meltdown, the government will ensure its spending is directed to support businesses and the people, Vice President Jusuf Kalla said Monday
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While remaining optimistic Indonesia’s economy will grow fairly well against the backdrop of the global economic meltdown, the government will ensure its spending is directed to support businesses and the people, Vice President Jusuf Kalla said Monday.
“Government spending should be increased and added immediately to benefit industries and increase people’s purchasing power,” Kalla said in the Netherlands before flying home.
The government has proposed to the House of Representatives a Rp 71.3 trillion economic stimulus package, in an attempt to prevent industries from resorting to mass layoffs that could undermine Indonesia’s consumption-driven economy.
Layoffs will raise unemployment, hurting people’s purchasing power.
The Indonesian Chambers of Commerce and Industry (Kadin) has said layoffs could peak at the start of second half of the year, in particular in the manufacturing sector.
With inflation likely slow to 5 percent by the end of the year, according to the central bank, the country’s economy may expand up to 5 percent if people’s purchasing power can be maintained, Kalla said.
Last year, the economy grew by an estimated 6.2 percent, with inflation reaching 11 percent.
The Vice President said Indonesia’s economy was now in a relatively good condition compared to other countries, especially in Europe and the US.
“We have no banks collapsing, no industries plunging. Private consumption hasn’t dropped.”
Private consumption accounts for about 70 percent of the economy, with exports and investments making up the rest.
Speaking before Indonesian citizens in the Netherlands, Kalla said Indonesia’s “conservative” economy was the reason the country had survived the financial storm almost unscathed.
“If our capital market drops, it is because all capital markets plunge,” he said, referring to last October’s stock market rout.
He added Indonesia should not worry much about the capital market as it did not contribute greatly to the economy.
“Indonesians should not worry too much about the capital market. What we need to worry about is the real sector. If Tanah Abang Market or Senen Market are hit by an economic crisis, then we need to worry.”
The Vice President, in his visit to Japan, the US, Belgium and the Netherlands, has repeatedly
said there will be a shift in Indonesia’s economy, more toward the real sector.
To boost that sector, the government will prioritize building infrastructure, the backbone of the economy, he said.
Jakarta Governor Fauzi Bowo, who accompanied Kalla in the Netherlands, said the government had asked local governments to speed up the bidding process for projects.
Jakarta, he said, had accelerated the drafting of its regional budget, with work on tendered projects possibly starting in late February.
