TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
IMF warns against premature stimulus exit
The International Monetary Fund (IMF) warns against a too-early stimulus withdrawal that may undermine the economy which is now recovering from the global economic recession
Change Size
T
he International Monetary Fund (IMF) warns against a too-early stimulus withdrawal that may undermine the economy which is now recovering from the global economic recession.
In a media briefing Monday, IMF senior resident representative Milan Zavadjil said a too-soon stimulus exit might affect the economy, and countries should wait until a recovery would be firmly in place.
“It would still be too risky to withdraw the stimulus now,” he said. “Even if it’s still too early to withdraw the stimulus, it is not too early for Asia to plan for a gradual measured exit over the next year or year-and-a-half.”
“The risk of ‘false dawns’ cannot be ruled out. There are still downside risks,” he continued.
Indonesia has cut the amount of stimulus for next year as the economy is coping well with the global recession. The country managed to score a 4.1 percent growth in the first half this year, and the government has estimated a full-year growth of 4.3 percent.
While this year the government widens its budget deficit to Rp 133 trillion (US$13.45 billion), or 2.5 percent of the country’s gross domestic product (GDP), next year’s deficit is predicted to be lower of Rp 98 trillion, or 1.6 percent of GDP.
There will not be a specifically-designated stimulus either, with the government allocating it into the budget of ministries and government agencies. This year the government allocated Rp 73.3 trillion in stimulus, Rp 12.2 trillion of which was for infrastructure projects.
The 1.6 percent budget deficit next year is “appropriate”, said Zavadjil. IMF estimated Indonesia’s economy would expand 4.8 percent next year, admitting that the figure was slightly “pessimistic”. It projected a 4 percent growth for 2009.
“This is somewhat less than the consensus ... But I think there is a real upside to this,” he said.
The government expects the economy to regain a 5.5 percent growth rate next year, supported by higher investment growth and still-strong private consumption.
Investment in Indonesia will increase next year as investors see that the country has strong demand, said Zavadjil. “Both Indonesian companies and multinational corporations will probably want to invest more here when they see a better recovery than in the rest of the world.”
