Govt maintains targets despite oil hike<\/p>\n
Fitri Wulandari, Jakarta<\/p>\n
The government has decided to maintain the macroeconomic
\nassumptions of the 2005 state budget draft as originally planned
\ndespite the surge in international oil prices.<\/p>\n
\"Basically, the (macroeconomic) assumptions and fiscal policy
\nof the 2005 state budget draft remain unchanged from what has
\nbeen discussed with the House of Representatives,\" Coordinating
\nMinister for the Economy Dorodjatun Kuntjoro-Jakti announced on
\nThursday.<\/p>\n
He was speaking following a Cabinet meeting on the 2005 draft
\nbudget, which will be unveiled by President Megawati
\nSoekarnoputri on Aug. 16 during her Independence Day speech.<\/p>\n
The House of Representatives budget committee approved in June
\nthe government's macroeconomic targets for next year. The
\neconomic assumptions include a lower budget deficit of 0.8
\npercent of gross domestic product (compared to 1.2 percent
\nassumed under the current budget), higher economic growth of 5.4
\npercent (compared to 4.8 percent forecast for this year), lower
\ninflation of 5.6 percent and an oil price average of US$24 per
\nbarrel (compared to $22 per barrel).<\/p>\n
But soaring international oil prices make these economic
\ntargets appear unrealistic.<\/p>\n
The oil price recently surged to a record level of $45 per
\nbarrel due to strong demand and supply disruptions. The price may
\nnot have yet reached its peak, with many doubting the price will
\ndecrease to below $30 per barrel anytime soon.<\/p>\n
A prolonged hike in oil price will not only push up inflation
\nbut will also slow down global economic growth, a condition that
\nwould harm the country's exports. The higher economic target for
\nnext year is based on, among other things, an assumption that
\nexports will grow stronger.<\/p>\n
The oil price assumption will also determine the amount of
\nfuel subsidy the government allocates for next year.<\/p>\n
All these developments will eventually also affect other
\neconomic targets set in the budget.<\/p>\n
Meanwhile, Minister of Energy and Mineral Resources Purnomo
\nYusgiantoro said that crude oil prices may ease next year
\nsupported by improving fundamentals, such improved security in
\nIraq which would boost the country's oil output.<\/p>\n
The economic assumptions will be used as the basis for
\ndrafting the 2005 state budget, which Dorodjatun said would be a
\n\"baseline budget\" to be further deliberated by the next House
\nmembers and administration.<\/p>\n
The new members of the House resulting from the April election
\nwill be installed in early October, while a new government will
\nassume office on Oct. 20.<\/p>\n
The current administration is drafting the 2005 state budget
\nconsidering the fact that both the new House members and
\nadministration will not have sufficient time to draft the budget
\nfrom scratch within the two months before the start of the budget
\nyear in January.<\/p>",
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