Boediono defends ambitious growth target for 2003
Dadan Wijaksana, The Jakarta Post, Jakarta
The government defended on Wednesday its ambitious economic growth target of 5 percent for 2003, saying consumption would remain robust, while the global economic recovery would improve the country's performance in exports and investment.
Minister of Finance Boediono told legislators during a plenary session with the House of Representatives that the growth target was based on better expectations of economic and non-economic factors, both at home and overseas.
"Generally, the economic target assumption of 5 percent for 2003 is realistic.
"Consumption will still comprise the largest part of (growth) ... while the role of investment and exports will increase as well," Boediono said during the session.
The session marks the early stages of the debate of the draft 2003 state budget.
The draft, presented to the House two weeks ago, assumes an economic growth of five percent. Analysts have described the figure as too ambitious given the current unfavorable conditions.
Last week, also during a House session, most of the ten factions of the House cast doubt on the assumption as the country was experiencing slumps in several economic areas.
The criticism centers mostly on the fact that the performance in exports and investment has so far been less than encouraging.
Throughout the first half, domestic and foreign direct investments dropped by 68 percent and 42 percent respectively compared to the same period last year, while exports were down by 6.7 percent in the same period.
Against this backdrop -- they argued -- it was unlikely that the 2003 target was within reach as the government could no longer bet on strong domestic consumption as the sole engine for growth. The latest data reveals that consumption has started to show signs of slowing.
In his response, while admitting that consumption was slowing down, Boediono said consumption would continue to become the prime mover of next year's economic growth.
"It is slowing down, but it will remain strong on consumers' expectations of an improved economic and earning prospects," he said, adding that consumption made up 80 percent of the country's gross domestic product (GDP).
In the meantime, while exports were expected to pick up in accordance with recovery in the world's economy, investment would also make a greater contribution to overall growth triggered by a more conducive climate in line with better political and security conditions here, he said.
"We expect investment to rise from the expected 4.8 percent this year to 7.6 percent in 2003, while exports will climb from an expected 4.7 percent in 2002 to 5.8 percent in 2003," Boediono added.
To achieve a more favorable climate, the government would press ahead with its various programs, including finalizing the draft law on investments.
Boediono said other efforts included maintaining and improving social, political and security conditions and also strengthening the justice system.
On the external front, Boediono expected the international recovery would increase the global trading volume growth from 2.5 percent to 6.6 percent in 2003.
"This would give us the potential to improve exports and investment performance, so it augurs well for accelerating the country's economic recovery," he said.