Boediono says 4.8 percent growth target still realistic
Boediono says 4.8 percent growth target still realistic
The Jakarta Post, Jakarta
The government is optimistic that the country's economy can
still grow by 4.8 percent this year as targeted, despite a
weakening currency, rising oil prices and an economic slowdown in
China.
"We think that the 4.8 percent growth target is still
realistic and can be achieved. We shouldn't be overly worried by
short-term changes. Who knows? Things will get better ahead,"
Minister of Finance Boediono said on Wednesday.
Boediono was responding to current developments in the
financial and oil markets.
The rupiah and the local stock market have been on a roller-
coaster ride during the past few weeks, particularly due to the
prospect of a hike in U.S. interest rates, surging oil prices and
a possible hard landing for China's economy as the authorities
there try to cool down an overheating economy.
The rupiah, for instance, has declined by around 5 percent
against the U.S. dollar over the past month as investors have
switched from rupiah-based to dollar-based assets.
The local stock market (as well as other markets in the world)
has also been under pressure due to fears of an interest rate
hike and surging oil prices, which, earlier this week, jumped to
a record high of more than US$41 per barrel.
The possibility of a sharp contraction in China's giant
economy has also affected many stock markets in the region as
China has become an important export market for many countries.
Boediono, however, expected that the impact of a slowdown in
the Chinese economy on the Indonesian economy would be limited.
"Although China is an important market (for Indonesia), it is
not top (on the list of the country's largest export markets),"
he said.
Indeed, some economists have said that although China has
increasingly become an important market for many economies in
Asia, it absorbed only around 15 percent of the region's total
exports last year.
The government hopes exports can increase their role in
accelerating the country's economic growth this year to 4.8
percent from 4.1 percent last year. The economy is projected to
grow by 5.5 percent.
On the impact of surging oil prices, Boediono acknowledged
that higher prices could inflate the government's budget deficit
target as they would imply greater fuel subsidies. The government
has decided not to raise fuel prices this year due to the
elections.
But he explained that although the fuel subsidy would be
greater, the country would also enjoy a windfall profit from
rising oil prices. Indonesia is the only member of the
Organization of Petroleum Exporting Countries (OPEC) in the
region.
He said that the government would still await developments in
oil prices in the second semester before deciding on whether to
change the budget deficit target.
The government has projected the 2004 budget deficit to reach
1.2 percent of gross domestic product, or around Rp 24.4
trillion.
There were hopes that oil prices might decline in the months
ahead as OPEC is scheduled to convene in June, and may decide to
raise output to help stabilize the price of the commodity.