Budget projects higher growth<\/p>\n
Urip Hudiono, The Jakarta Post, Jakarta<\/p>\n
The government is upbeat about the economy for the 2006 state
\nbudget, projecting higher growth and a lower deficit in its
\nbudget draft, despite this year's budget blowout following
\ncontinually high international oil prices.<\/p>\n
Unveiled on Tuesday by President Susilo Yudhoyono in his
\nannual state of the nation address to the House of
\nRepresentatives, the draft predicts the economy will expand by
\n6.2 percent in 2006 -- the highest growth since the crisis and
\nslightly higher than this year's expected growth of 6.0 percent.<\/p>\n
It also projects a decline in the deficit to 0.7 percent of
\nGDP, after it bulges to an estimated 1 percent for this year.<\/p>\n
The targets are based on similarly optimistic assumptions --
\nthat oil prices will average US$40 a barrel next year, that the
\nrupiah exchange rate will settle at Rp 9,400 per U.S. dollar and
\nthat inflation will ease down to 7 percent.<\/p>\n
Oil prices are presently still above $60 a barrel, the rupiah
\nhas recently hit its latest low of Rp 9,900, while July's
\nheadline inflation reached 7.84 percent -- all missing their
\nassumed marks in this year's budget.<\/p>\n
With high oil prices, coupled with a recent weaker footing of
\nthe rupiah pushing up inflation and key interest rates -- all of
\nwhich dampened consumer spending -- economic growth has declined
\nover recent months.<\/p>\n
The Central Statistics Agency (BPS) said recently the economy
\nhad grown in the second quarter of the year by only 5.54 percent
\n-- marking a continued economic deceleration for the second
\nstraight quarter, having grown by 6.19 percent in this year's
\nfirst quarter and 6.67 percent in the final quarter of last year.<\/p>\n
Despite the decline, Susilo said he was confident that the 6.2
\npercent GDP growth target would be attainable, betting in part on
\nthe expected revival of the global economy next year.<\/p>\n
\"This will boost our exports, while our consumption demand and
\ninvestment momentum are also expected to remain strong,\" he said.<\/p>\n
Investment Coordinating Board (BKPM) data shows foreign direct
\ninvestment has amounted to $4.9 billion in the period ending
\nJuly, nearly double that in the same period last year. The BPS,
\nmeanwhile, reported a 27 percent increase in exports to $40.58
\nbillion during this year's first semester.<\/p>\n
Susilo, however, admitted that the growth target would still
\nbe unable to reduce the overall level of unemployment and poverty
\nin the country.<\/p>\n
\"Nevertheless, our economic growth is expected to continue to
\nincrease in the years to come, along with our success in
\novercoming the existing impediments,\" he said, reiterating the
\ngovernment's vow to improve the country's investment climate by
\ncurtailing corruption, ensuring legal certainty for investors and
\nproviding tax incentives.<\/p>\n
Susilo said next year's budget planned for a deficit of Rp
\n19.8 trillion (some US$2 billion).<\/p>\n
Revenue was targeted at Rp 539.4 trillion -- mostly from
\ntaxes, reaching 13.4 percent of the GDP from its current 12.6
\npercent -- while total expenditure was set at Rp 559.2 trillion.
\nThe government said it planned to reduce the burden of the fuel
\nsubsidy on the budget from Rp 76.5 trillion to Rp 68.5 trillion.<\/p>\n
Susilo's administration aims to achieve a balanced budget by
\n2007.<\/p>\n
To finance next year's deficit, the government will issue more
\nbonds, continue the privatization of state-owned enterprises and
\nconduct sales of state assets managed by the Asset Management
\nCompany (PPA).<\/p>\n
\"We will also still need foreign loans, estimated at some Rp
\n29.9 trillion,\" Susilo said, adding however that the government
\nexpected the country's debt-to-GDP ratio to continue to decrease
\nnext year to 42.8 percent from 49.1 percent this year.<\/p>\n
Reacting to the address, many legislators expressed their
\nskepticism about the draft, particularly regarding the oil price
\nassumption, which they suggested should have been set at a more
\nrealistic level of between $50 and $60 a barrel.<\/p>\n
The House is expected to finish deliberating the budget draft
\nwith the government by September.<\/p>",
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