inistries are contradicting each other regarding the economic growth target for 2016 being 5.2 percent, with the Coordinating Economic Minister Darmin Nasution expressing optimism over it despite the finance minister’s signal that it should be revised downwards.
Darmin said investments would be the main drivers in the second half of 2016, especially in the electricity sector. "Especially investment in the 35,000-megawatt [MW] power plant project. Most of them were already being financially processed last year and some of them are in financial closing this year [....] so I still consider 5.2 percent growth to be achievable," he said in Jakarta on Friday.
He acknowledged that it would be harder to achieve the target because of the Rp 137 trillion (US$10.34 billion) budget cuts that will be undertaken to offset a shortfall in state revenues, especially as government spending is a main contributor to gross domestic product (GDP).
However, Darmin predicted the negative effects of the cuts on the economy will be offset by household consumption, investment and trade. "If the government’s spending is decreased, it will not affect the growth as long as the realized investments get better, but if all indicators are decreased, obviously it will impact growth," he said.
Previously, Finance Minister Sri Mulyani Indrawati had signaled that the growth target for this year would be revised downwards to between 5 percent and 5.2 percent, following the ministry’s decision to cut Rp 65 trillion from the central government budget and Rp 73 trillion from regional transfer funds.
Earlier, the central bank revised down its projection of Indonesia's economic growth by 0.1 percent from 5 to 5.4 percent to 4.9 to 5.3 percent because of the budget cuts. (ags)
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