W

ith the ongoing uncertainty in the global economy, analysts say that the government’s target of achieving economic growth of between 6.8 percent and 7.2 percent in 2013 is too ambitious.

“I think the target is too high,” Yogyakarta-based Gadjah Mada University (UGM) economist, Mudrajat Kuncoro, told The Jakarta Post on Friday.

With the slow recovery of the world economy, it would no longer be able to rely heavily on its exports to spur economic growth, he said.

Moreover, with the government’s current financing capacity, it would be difficult for the government to increase capital spending in order to increase economic growth, Mudrajat said.

“So far, the government’s capital spending for infrastructure development has contributed only around 7 percent to our gross domestic product [GDP],” he said. As a comparison, domestic consumption accounts for 57 percent of total GDP.

Mudrajat estimated the country’s exports could further decline next year due to decreasing demand from traditional markets, such as European countries and the United States that have yet to recover from the impact of the global crisis.

“So, the diversification of export targets will also be key for the government to achieve its economic growth target,” he said.

The economic growth target was unveiled by Finance Minister Agus Martowardojo in his speech during the presentation of the government’s macroeconomic assumption before a House of Representatives’ plenary session in Jakarta on Wednesday. The economic assumption will be used as the basis for drafting the 2013 state budget.

The government sets inflation at between 4.5 percent and 5.5 percent, rupiah-to-US dollar exchange rates at between Rp 8,700 and Rp 9,300 per dollar and the Indonesian Crude Price (ICP) index at between US$100 and $120 per barrel.

The government also set a target of between 910,000 and 940,000 barrels per day (bpd) of oil lifting (net oil sales), and between 1.29 million barrels of oil equivalent per day (boepd) and 1.36 million boepd of gas lifting. It will be the first time the government has included gas lifting in the state budget. In previous years, the government only included oil lifting.

Standard Chartered economist Fauzi Ichsan said he believed the relatively low inflation target could be achieved as long as the government maintained its stance on not raising subsidized-fuel prices until the end of the year.

“If the government decides to raise subsidized-fuel prices, then inflation will rise to more than 5.5 percent,” he said.

Mudrajat said the government needed to determine more ways than just fiddling around with subsidized-fuel prices to keep inflation down.

“The government cannot continuously play around with subsidized fuel-price rates. In the long run, the government must do their best to ensure the success of the fuel-to-gas conversion program,” he said.

Agus said the government was confident on reaching the target due to current global economic development, which had shown signs of recovery.

He added that the global economy would recover in the year 2013 with an assumed expansion rate of 4.1 percent.

Developing and emerging economies are predicted to contribute significantly to global economic growth in 2013, when trade volume is also expected to grow at around 5.6 percent with the support of 7.2 percent of export growth and 8.1 percent of import growth.

“Nevertheless, numerous challenges and risks will remain in 2013, including the uncertainty of European recovery, the potential slow down of developed countries’ growth and increasing fluctuations in oil prices,” Agus said.