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Third stimulus package must focus on demand side: Indef

Saving the economy: Coordinating Economic Minister Darmin Nasution explains the government’s second economic stimulus package at a press conference at the State Palace in Jakarta on Thursday

Ayomi Amindoni (The Jakarta Post)
Jakarta
Sun, October 4, 2015

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Third stimulus package must focus on demand side: Indef

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span class="inline inline-center">Saving the economy: Coordinating Economic Minister Darmin Nasution explains the government'€™s second economic stimulus package at a press conference at the State Palace in Jakarta on Thursday. (Courtesy of setkab.go.id)

Institute for Development on Economics and Finance (Indef) executive director Enny Sri Hartati said it was unlikely that the government'€™s first and second economic stimulus packages would be effective in helping the country avoid a further slowdown as they only focused on the supply side.

Therefore, the economist said, the third economic stimulus package the government was scheduled to announce next week should focus more on the demand side.

"We [Indef] recommend that the third package be focused on the demand side, especially on measures to restore people'€™s purchasing power," she said in a discussion held by Indef in Jakarta on Saturday.

Enny further explained that the government'€™s plan to reduce fuel and electricity prices would slightly help its efforts to improve people'€™s purchasing power. The money people normally spent on fuel could be used to buy goods, she added.

"They will have a portion of income that they can use for consumption. Circumstantial declines in fuel prices would not automatically lead to declining prices of goods but at least they would directly boost people'€™s purchasing power," she said.

Enny went on to say that it seemed that the effectiveness of the first and second economic stimulus packages would not be optimal as indicated by continuous declines in business and consumer indexes.

According to Bank Indonesia data, Indonesia'€™s consumer confidence index stood at 97.5 in September, down by15.1 from August. The index has seen a downward trend since January. (ebf)

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