T

he government plans to introduce a fiscal stimulus to spur growth in Southeast Asia’s largest economy next year as uncertainties in the global economy may drag down the country’s economy, a top official says.

“We learned in 2008 that we need to boost Indonesia’s economic growth with stimulus. In order to mitigate negative conditions that could affect Indonesia, we have to react to protect,” Finance Minister Agus Martowardojo told members of the House of Representatives’ Commission XI overseeing financial affairs on Thursday.

The United States’-led subprime mortgage crisis, which hit the world’s financial sector in late 2008, also had a severe impact on global economic growth, including in Indonesia the following year. The country’s economic growth slowed to 4.5 percent in 2009 from 6.1 percent the previous year.

To mitigate the impact of the world’s economic slowdown, President Susilo Bambang Yudhoyono’s administration launched a Rp 73 trillion (US$8.322 billion) stimulus package and added government spending as well as fiscal incentives in the form of government-borne import duties and value added and income taxes, to help revive business activities and to avoid employment cuts.

Recent mounting worries over debt troubles in European countries and stalling economic recovery in the United States have prompted policy makers across the world to guard against a potential economic slowdown worldwide.

Bank Indonesia (BI) has predicted a slowdown in the country’s economic growth to 6.5 percent from the 6.6 percent projected this year, due to slowing global demand, which could hurt the country’s exports.

Agus declined to give details of the planned stimulus package, which is scheduled to be launched in the first half of next year, but acting chief of the finance ministry’s fiscal policy office Bambang Brodjonegoro said it would combine “fresh money and policies”.

“The most important thing is to create sources for domestic growth, so all stimulus has to have a direct impact on domestic growth, both in terms of consumption and investment,” Bambang told reporters after the House session.

“We have not yet discussed if it will be [the same as in] 2009. We will look at the latest situation and the condition of our budget.”

National Planning Minister Armida Alisjahbana said the fresh money for the economic stimulus might be used to finance infrastructure projects.

BI officials said the government’s 6.7 percent target for 2012 could be achieved if the economy’s focus is shifted to the domestic economy in order to lower dependency on external factors, and if the government speeds up budget disbursement, creating a multiplier effect on the country’s economy.

“It’s our intention to have a system that can properly disburse the budget within the government, state bodies and regional [government],” Agus said. “The government should reflect on how to create a sufficient procurement [process]; unlike now, where funds are ready but are not disbursed.”

Head of research at the Danareksa Research Institute, Purbaya Yudhi Sadewa, welcomed the government’s move, but said speedy budget disbursement, primarily for infrastructure projects that can create jobs and have a multiplier effect for the economy, is crucially important.

“Even in the face of a global economic slowdown, there is no need for the government to provide stimulus to keep the economy on track. The most important thing is to quicken the disbursement of the budget for development projects,” Purbaya told the Post over the phone. “If it’s just fiscal stimulus without a boost in additional spending, the impact will not be significant.”

At the beginning of the year, the government had Rp 97 trillion in accumulated budget surpluses, which Purbaya said could have a significant impact upon the country’s economy if it is better used.