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Govt keeps 2016 growth target despite doubts
The government has maintained its economic growth target for 2016, despite most factions at the House of Representatives insisting that the estimate is unrealistic
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T
he government has maintained its economic growth target for 2016, despite most factions at the House of Representatives insisting that the estimate is unrealistic.
Finance Minister Bambang Brodjonegoro said in Jakarta on Thursday that the government was optimistic that the economy would grow between 5.8 and 6.2 percent next year, as set out in the proposed 2016 state budget.
Speaking during the deliberation of the 2016 macroeconomic assumptions with the House, Bambang said the expected sharp increase in infrastructure spending and high domestic consumption would help to accelerate economic growth.
The minister was responding to statements given by the House's factions two days earlier on the proposed economic indicators.
At an earlier session, 300 lawmakers from nine parties and the government agreed to further discussions, with the proposed budget considered 'too optimistic' in light of the slowdown in the world economy.
'Despite domestic and external risks, we think that the assumption of 5.8-6.2 percent economic growth next year is realistic,' Bambang said in his speech.
Indonesia saw 4.7 percent economic growth in the first quarter of this year following weakened global growth on falling commodity prices and struggling major economies, including China.
While acknowledging that global commodity prices would remain low, Bambang said the government's optimism was based on a better outlook for the world economy next year, which would, according to many international agencies and analysts, grow by at least 3.8 percent.
Bambang said a number of countries, including Indonesia's major trading partners, were expected to grow more rapidly next year, while domestic and foreign investments would increase as infrastructure development improved, claiming that household consumption would grow around 3-5 percent next year.
'Indonesia has a demographic structure dominated by a productive age population expected to push household consumption, which comprises around 55 percent of the country's gross domestic product [GDP],' he said.
In order to achieve the goal next year, Bambang said the government would increase its spending on infrastructure development to strengthen connectivity, mainly related to the maritime sector, food and energy sovereignty, manufacturing and tourism, although he refused to give the exact figures.
Also on spending, Bambang said the newly introduced village funds would drive regional development, with the government planning to allocate around 6-7 percent of the total budget to villages, higher than this year's 3 percent. The portion would also be higher than the spending on ministries and agencies of the central government, he added.
'We also want to fulfill the mandate of the health law by allocating 5 percent of the budget to the healthcare sector, which will have a positive effect on the Health Ministry and special allocation funds, as well as other health institutions,' Bambang said.
On the revenue side, Bambang said the government would also increase the level of non-taxable income (PTKP) from Rp 2 million (US$151.5) a month to Rp 3 million in order to boost people's purchasing power, as the country had seen weak consumption lately.
The country having seen weak tax revenue in the first quarter, Bambang said the government, in the proposed 2016 budget, would focus on better management of fiscal risk, adding that next year's deficit would be in a controlled range of 1.7-2.1 percent 'without leaving the quality of productive spending'.
'We want to provide a larger stimulus for the economy next year, while also reducing net additional debt to maintain a healthy budget,' Bambang said.
President Jokowi will deliberate the proposed 2016 state budget with the House during the Financial Note speech on Aug. 17, a legislative tradition.
