Economists support economic stimulus plan<\/p>\n
Dadan Wijaksana, The Jakarta Post, Jakarta<\/p>\n
Analysts agreed that an economic stimulus package, including
\nan increase in development spending, was necessary to protect the
\nalready fragile economy from further faltering next year due to
\nthe deadly terrorist attacks in Bali two weeks ago.<\/p>\n
\"An increase in development spending will give a boost to
\ninfrastructure development. This will in turn boost economic
\nactivities and absorb many workers,\" Chatib Basri, an economist
\nat University of Indonesia's Institute for Economy and Social
\nResearch (LPEM) told The Jakarta Post on Tuesday.<\/p>\n
Chatib said the Bali bomb blast had dealt a blow not only to
\nthe tourism industry but the overall economy.<\/p>\n
He made the statement following the announcement by the
\ngovernment that it would raise development spending for 2003 to
\nmitigate the impacts of the Bali bombing. It however did not
\nspecify the amount.<\/p>\n
Under the 2003 budget draft, presented to the House of
\nRepresentatives in August, development spending was set at Rp
\n54.5 trillion, or 2.8 percent of gross domestic products (GDP).<\/p>\n
Although the increase would lead to a larger budget deficit,
\nthe government said it was necessary to encourage business
\nactivities at a time when businessmen were expected to scale down
\ntheir operations or delay investment due to security concerns.
\nThe deficit initially stood at Rp 26 trillion or 1.3 percent of
\nGDP.<\/p>\n
According to Raden Pardede of Danareksa Research Institute,
\nthe deficit could widen by between Rp 20 trillion to Rp 25
\ntrillion.<\/p>\n
He based his calculation on an estimated Rp 10 trillion of
\nloss in potential tax incomes, coupled with the funds needed for
\ninfrastructure development in Bali.<\/p>\n
The government said it would ask creditor countries to provide
\nmore loans to help cover the larger-than-expected deficit. The
\nnext meeting with the donor countries grouped under the
\nConsultative Group on Indonesia (CGI) is said to be the country's
\nbest chance to ask for such requests.<\/p>\n
To make the stimulus more effective however, Chatib suggested
\nthe government also provide tax incentives.<\/p>\n
\"This will strengthen the people's purchasing power. So the
\ngovernment could classify as to which sectors such incentives
\nwill be focused on. I think the sectors with high multiplier
\neffects should be the priority,\" he said, while adding that the
\ntextile sector was one such industry.<\/p>\n
\"If the government is willing to cut luxury tax on electronic
\ngoods for example, this would have a significant effect on the
\nindustry.\"<\/p>\n
The government currently imposes luxury taxes on the industry
\nof up to 70 percent.<\/p>\n
Amid the drop in foreign and domestic investment and falling
\nexports, domestic consumption has become the backbone of the
\ncountry's economic growth for several years.<\/p>\n
However, following the Bali bombing, there is a fear that
\nconsumption will drop.<\/p>\n
As a matter of fact, even before the Bali attacks, economists
\nhad called for an economic stimulus plan in order to attain high
\neconomic growth.<\/p>\n
High economic growth would help to absorb the tens of millions
\nof unemployed, as well as push them above the poverty line. There
\nare currently close to 40 million Indonesians classified as
\nliving below the poverty line.<\/p>\n
But, the economists say the 2003 state budget did not offer
\nmuch room for a stimulus package, pointing to the fact that the
\nbudget was designed more to service debt payments than to drive
\nthe economy.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/economists-support-economic-stimulus-plan-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}