Indonesia's economy may expand 4.6 percent in the second half of this year, bringing full-year growth to 4.3 percent, helped by external factors that improve trade and investment.

The global economy is estimated to recover in the second half of 2009, increasing global demand, which will boost trade, while investment may also improve as the liquidity crunch eases, Finance Minister Sri Mulyani Indrawati said Tuesday.

"Household consumption growth will be maintained at about 5 percent *to bolster growth*," Mulyani said at a hearing with the House of Representatives' budget committee, while presented a second revision to the 2009 state budget, aiming to better manage recent developments in the global economy.

Under the revision, government spending will also be pushed to spur growth.

The economy may have expanded 4.1 percent in the first half of this year, with less than 4 percent growth in the second quarter (although official figures have yet to be released), Mulyani said.

According to the Central Statistics Agency (BPS), Indonesia's economy grew 4.4 percent in the first quarter of 2009 from a year earlier, helped by robust domestic consumption.

Domestic consumption, which constitutes about 60 percent of Indonesia's GDP, remains strong as inflation continues to slow. Inflation is predicted to slow to less than 5 percent by the end of this year.

"If seasonal factors *such as the fasting month, Idul Fitri and Christmas holidays* don't create strong pressures, inflation for the whole year may be about 5 percent or lower," Bank Indonesia (BI) deputy governor Hartadi A. Sarwono said.

Low inflation bodes well in efforts to keep consumer spending high and domestic consumption robust.

BI also estimated that the rupiah would strengthen in the second half this year, making a full-year average of between Rp 10,500 and Rp 11,000 per US dollar, while the rate for three-month BI certificates, which currently stands stood at around 8.7 percent, would drop to between 7.25 and 7.75 percent.

These figures are in line with the government's expectations. In the second half of 2009, the rupiah is predicted to be stable at Rp 10,600 per dollar, while interest on three-month BI certificates is expected to be 7.5 percent, Mulyani said.

All in all, the economy seems to be well managed and is keeping steady amid the global economic downturn, supported by prudent fiscal and monetary policies.

Mulyani's proposed second revision to the 2009 state budget saw little change from the first revision (dubbed the "stimulus document"), which was submitted to the House early this year as impacts of the global financial crisis turned out to be bigger than estimated when the government and House first drafted the 2009 budget.

State revenue is estimated to reach Rp 872.6 trillion, while state expenditure is expected to be Rp 1,005.7 trillion, resulting in a budget deficit of Rp 133.1 trillion, or 2.5 percent of the gross domestic product (GDP).

Revenue from taxation is expected to fall short of its targeted Rp 652.1 trillion by 1.5 percent, but this shortage may be covered at least partially by the Customs and Excise Office which is expected to exceed its collection target by up to 1 percent.

Central government spending is predicted to improve dramatically compared to previous years, exceeding its targeted Rp 696.2 trillion by an estimated 1.8 percent.

"There will be a rewards and punishments system for ministries and government agencies that fail to disburse all of their the budgeted funds.

"It seems the government *traditionally* hasn't taken into account the time factor in its *spending* plans because spending often accelerates in the second half *of the year*," budget committee vice chairman Harry Azhar Aziz said.

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