Wed, 30 Apr 2008
Novia D. Rulistia, The Jakarta Post, Jakarta

The government may again reduce its industrial output growth target for this year as soaring oil prices push up production costs and inflation.

"The revision is automatic. The government also revised its state budget and reduced its growth target from 6.8 percent to 6.4 percent," Industry Minister Fahmi Idris said Monday.

Dedi Mulyadi, head of research and development at the ministry, said the government was revising the target but further talks and studies were needed before coming up with exact figures.

"If there's a change, it must be below the current target of 6 percent," he said, adding they would wait for the National Development Planning Agency's (Bappenas) simulation before making a decision.

In March, the government cut the growth target from 7.4 percent to 6 percent, mostly due to external factors. It also revised the 2009 target from 8.6 percent to 6.5 percent.

The international oil price reached US$119.93 per barrel Monday, reaching another all-time high.

Under the revised state budget, the government and the House of Representatives set the price of oil at $95 per barrel up from $60 per barrel.

The inflation rate projection has been raised to 6.5 percent from 6 percent, far from market expectations of 7 percent.

Dedi said revising the growth target was necessary to sharpen the government's strategy in improving industrial performance.

The government must focus on the downstream sector as it has high added value with a strong market and natural resources, he said.

The Industry Ministry said growth in the manufacturing sector could only rely on machinery, tools and carriers. The ministry predicts the sector will grow by about 9.77 percent, while wooden goods and forestry products will shrink by around 0.06 percent.

Industrial growth in 2007 reached its lowest point in the last three years, standing at 5.15 percent. It was 5.3 percent in 2006 and in 5.9 percent in 2005.

Analysts attribute the sluggish growth to the lack of fiscal and non-fiscal incentives enjoyed by businesses in countries such as China, India and Vietnam.



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