From: By Katherine Demopoulos in Jakarta
Susilo Bambang Yudhoyono, Indonesia’s president, on Monday forecast faster growth net year and a narrowing of the country’s fiscal deficit, alongside a likely increase in inflation.
In his 2010 budget announcement, Mr Yudhoyono said Indonesia was targeting growth of 5 per cent in 2010. Indonesia’s finance ministry has forecast 4.3 per cent growth for this year.
The resilience of Indonesia’s economy is attributed to relatively sturdy domestic consumption, due in part to spending associated with this year’s legislative and presidential elections. And with just 30 per cent of Indonesia’s growth derived from exports, it has been insulated from the global financial crisis to a greater degree than many of its Asian peers.
Mr Yudhoyono said Indonesia planned to trim its deficit to 1.6 per cent of gross domestic product from a target of 2.5 per cent this year, calling it a “safe and appropriate” level. The International Monetary Fund last week said Indonesia could afford a 2 per cent deficit in 2010 in order to maintain sufficient fiscal stimulus.
Fiscal stimulus for “the development of agriculture, infrastructure and energy” would come to $6.2bn in 2010, said Mr Yudhoyono. This is lower than the 2009 stimulus package of approximately $6.3bn.
Mr Yudhoyono also forecast an increase in inflation to 5 per cent in 2010. Inflation in June was 3.65 per cent while the July figure is expected later on Monday.
The overall budget will rise to $91.89bn, up $3.91bn from the revised 2009 budget. The forecasts are based on an assumed Indonesian oil price of $60 per barrel, a targeted increase in output to 965,000 barrels per day from a full year 2009 target of 960,000, and an assumed exchange rate of Rp10,000 to the dollar.