2003 budget may be based on 4% GDP growth: Kwik
The Jakarta Post, Jakarta
The government may base the 2003 state budget on an economic growth rate of 4 percent, which is the same as this year's growth target, State Minister of National Development Planning Kwik Kian Gie said on Thursday.
Kwik did not give an explanation for the rather pessimistic projection, but said that the figure was a preliminary one.
"I think (an assumption of) 4 percent is realistic for the country," Kwik said.
He was speaking to the media following a Cabinet meeting that focused on preparations for the next state budget.
The next meeting will be held on May 8 to finalize the various macroeconomic assumptions for the budget.
Many financial institutions and analysts said that this year's 4 percent growth target would be hard to achieve amid the current global economic slowdown, which puts a brake on the country's exports. However, many predict that next year's economic growth rate would be close to 5 percent. The UN, for instance, has predicted a 4.9 percent growth rate.
A 4 percent economic growth rate is seen as insufficient to absorb the huge unemployment created by the devastating 1997 economic crisis.
Analysts said that the country needed to return to the precrisis growth rate of 6 percent to 7 percent.
As for the exchange rate assumption, he said that the currency would be hovering within the range Rp 8,750 to Rp 9,700 per U.S. dollar.
"It would be good for the economy if the rupiah stabilized at around 9,000 to the dollar," he added.
The exchange rate assumption in this year's state budget is set at Rp 9,000 per dollar.
Given the current strengthening of the rupiah, it would not be too difficult for the government to achieve that target.
The rupiah has appreciated by more than 10 percent from the level it was at the beginning of this year. It has been getting a boost lately from a slew of positive news, including the successful sale of government shares in Bank Central Asia (BCA), a rescheduling deal with the Paris Club of creditor nations over the country's sovereign debts, and approval for the disbursement of the IMF $347 million loan tranche.
Kwik declined to disclose the state budget deficit figure for next year, but when asked whether it would be less than 2 percent of gross domestic product (GDP), he said it would be very difficult to achieve that level, given the huge cost of the bank bailout program.
The government issued more than Rp 600 trillion-worth of bonds in the late 1990s to finance the bank bailout program. The state budget covers interest payments on the bonds. For this year alone, the budget must allocate more than Rp 59 trillion to cover the interest.
The state budget deficit this year is targeted at 2.5 percent of GDP.