'Budget realistic, but lacks stimulus'<\/p>\n
The Jakarta Post, Jakarta<\/p>\n
The 2004 draft budget unveiled on Thursday offers little room for
\nstimulating economic activities and, therefore, experts concur
\nthat it will not help much in achieving the government's target
\nof 5 percent growth next year.<\/p>\n
Aside from the growth target, they see the other assumptions
\nin the 2004 draft budget as realistic given the current global
\nand domestic economic circumstances.<\/p>\n
Economists Raden Pardede from Danareksa Research Institute and
\nFauzi Ichsan from Standard Chartered Bank agreed that the budget,
\ndue to its belt-tightening measures, would do little to stimulate
\nmore robust economic activities so as to generate higher growth.<\/p>\n
As the budget would not drive growth, they said the private
\nsector was the only hope for boosting economic activities and
\ncreating employment.<\/p>\n
\"Don't expect much from the budget by way of stimulating the
\neconomy as the options and the money are limited,\" Raden said.<\/p>\n
Fauzi concurred, saying: \"Under the current circumstances, the
\nstimulus can only come from the private sector.\"<\/p>\n
Achieving higher economic growth is crucial to helping resolve
\nthe country's unemployment problem, with open unemployment
\nstanding at around 40 million.<\/p>\n
The 2004 draft budget foresees total spending of Rp 368.79
\ntrillion (US$44.43 billion), lower than this year's figure of Rp
\n370.59 trillion.<\/p>\n
This lower spending is mainly due to a drop in debt interest
\npayments to Rp 68.5 trillion from Rp 81.97 trillion. The
\nallocations for other spending items, however, have increased.<\/p>\n
The government is apparently trying to suppress spending,
\nespecially on debt servicing, in a bid to reduce the country's
\nperennial budget deficit. It is aiming for a zero budget deficit
\nstarting 2005.<\/p>\n
Next year's budget deficit is expected to fall to 1.2 percent
\nof gross domestic product, or Rp 24.9 trillion, from 1.8 percent
\nthis year, or Rp 34.44 trillion.<\/p>\n
Besides the growth target of 5 percent, the government has
\npresented moderate assumptions for other economic indicators for
\nnext year, such as an inflation rate of 7 percent, rupiah
\nexchange rate of Rp 8,700 against the greenback, oil price of
\nUS$21 per barrel and daily crude oil output of 1,150 million
\nbarrels.<\/p>\n
When delivering the budget speech before the House of
\nRepresentatives, President Megawati Soekarnoputri said the
\nconservative assumptions were due to the tough challenges
\nIndonesia had to face next year, which included: \"holding the
\ngeneral elections and bringing to a close the financial
\narrangement with the IMF (International Monetary Fund).\"<\/p>\n
Fauzi noted that apart from the growth target, Indonesia had
\ngood chances of outperforming the other assumptions.<\/p>\n
\"Most of the assumptions are conservative. Take the rupiah for
\nexample, it could well be hovering at below the 8,000 level next
\nyear, assuming that the election goes off smoothly, which I think
\nit will.<\/p>\n
Fauzi noted that the government had achieved better results
\nthis year than originally targeted. Low inflation and a stronger
\nrupiah were examples of this.<\/p>\n
Also, the government had raked in more income from oil and gas
\nexports due to higher international oil prices than were targeted
\nin the budget.<\/p>\n
Raden and Fauzi believed that the conservative figures in the
\ndraft budget could instill confidence among market players and
\ninvestors that Indonesia, even without the IMF program, could
\ndeliver prudent fiscal policies.<\/p>\n
David Nellor, head of the IMF representative office in the
\ncountry, also welcomed the conservative targets for the
\nmacroeconomic parameters set out in the draft budget.<\/p>\n
\"We welcome the more optimistic outlook on inflation and that
\nthe government is targeting growth in the 4 percent to 5 percent
\nrange.<\/p>\n
\"The prospects of achieving the upper end of the range rest,
\namong other things, on the government's resolve to safeguard the
\nprogress made to date and to strengthen reform in areas related
\nto the investment climate,\" Nellor said.<\/p>\n
State Budget 2003 and 2004
\n-----------------------------------------------------
\nBasic assumptions 2003 2004<\/p>\n
(proposed)
\n-----------------------------------------------------
\nGDP (trillion Rp) 1,940.0 2,003.3
\nGrowth (%) 4.0 5.0
\nInflation (%) 9.0 7.0
\nExchange Rate (Rp\/US$) 9,000 8,700
\nBI's 3-month Rate (%) 13.0 9.0
\nOil Price (US$\/barrel) 22.0 21.0
\nOil Output (barrels\/day) 1.27m 1.15m<\/p>\n
-----------------------------------------------------
\nSource: Ministry of Finance<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/budget-realistic-but-lacks-stimulus-1447893297",
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