Minister sees lower growth next year<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
With the impact of the recent economic slowdown set to continue
\nuntil the second half of next year, the economy would likely grow
\nslower than expected, Minister of Finance Sri Mulyani said on
\nTuesday.<\/p>\n
\"From the projections made by the government and other
\ninstitutions, economic growth next year is likely to head
\ndownward,\" said Mulyani, after meeting President Susilo Bambang
\nYudhoyono and Vice President Jusuf Kalla on Tuesday.<\/p>\n
\"The (current) slowdown will affect economic activities and
\nstate revenues ... Many believe that next year's growth will
\nstand between 5.3 percent and 5.7 percent, with the government
\nnow gathering efforts to improve it,\" she said.<\/p>\n
The government officially forecast the economy to grow by 6.2
\npercent next year, as stated in the 2006 state budget.<\/p>\n
Inflation has accelerated to 18.4 percent in the first eleven
\nmonths of the year, the highest in six years, with the central
\nbank being forced to raise its key interest rate. The benchmark
\nrate now stands at 12.75 percent.<\/p>\n
High inflation and interest rates have contributed to a
\nslowdown in the economy as they have put a brake on the
\nconsumption-driven economy, with both consumer loans and credit
\nfor business expansion becoming more expensive.<\/p>\n
The economic slowdown has become even been apparent this year,
\nwith growth being on a declining trend since the start of the
\nyear. Expanding by 6.1 percent in the first quarter, the economy
\ngrew slower in the following two quarters; 5.8 percent and 5.3
\npercent respectively.<\/p>\n
For the full-year, the economy would likely expand by 5.5
\npercent, as compared to the 6 percent target.<\/p>\n
Bank Indonesia governor Burhanuddin Abdullah recently told the
\nPresident that economic growth would be between 5 percent and 5.7
\npercent next year.<\/p>\n
At Tuesday's meeting, Sri Mulyani also informed Susilo and
\nKalla of several economic challenges for next year, including a
\nhigher burden in servicing interest on government debt as a
\nresult of higher interest rates.<\/p>\n
Under the 2006 state budget, the government will spend around
\nRp 91.6 trillion (US$9.25 billion) for servicing debts, both
\nprincipal and interest, next year. The figure is based on
\nassumptions that the rupiah will average Rp 9,900 to the U.S.
\ndollar, inflation at 8 percent, and three-month Bank Indonesia
\ninterest rates at 9.5 percent.<\/p>\n
\"High interest rates until the second half will severely
\naffect our expenditure for servicing debt. A one percent rise in
\nthe rate will cost the government an additional Rp 3 trillion
\n(about US$300 million) in interest payments,\" said Sri Mulyani.<\/p>\n
Other problems next year include a decline in state revenues
\namid increasing public service wages, and larger development
\nallocations to stimulate the economy.<\/p>\n
\"We have to be more prudent in managing our fiscal position
\nnext year in order to avoid the deficit exceeding 0.7 percent.
\nLower revenue from taxes as a result of the economic slowdown is
\nlikely to affect our state budget,\" said Mulyani.<\/p>\n
Indication of a decline in tax revenue has already become
\napparent this year with the tax office likely to fall short of
\nreaching its Rp 351.9 trillion target by Rp 3.51 trillion, or
\nabout one percent.<\/p>\n
For non-tax revenues, the government would likely only secure
\n66 percent of the targeted Rp 180.6 trillion.<\/p>\n
Many economists calculate that a one percent increase in
\neconomic growth could absorb up to 400,000 job seekers.<\/p>",
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