Expectations high but Budiono no miracle worker, analysts say
Expectations high but Budiono no miracle worker, analysts say
Urip Hudiono, The Jakarta Post, Jakarta
Improving coordination among the economic ministries and the
management of the state budget is what analysts say former
finance minister Boediono must immediately do upon his return to
government in order to put the economy on the right track again.
"There are two important things that Boediono -- or whoever
will be appointed as finance or chief economics minister -- must
prioritize now," economist Kahlil Rowter of Mandiri Sekuritas
told The Jakarta Post.
"The first is to better coordinate the government's fiscal
policies with the central bank's monetary policies; the second is
to maintain stability in the country's financial sector -- in the
mutual funds market, for example -- which has more or less
affected investor confidence and caused volatility in the
rupiah."
Kahlil explained that as Bank Indonesia (BI) was at present
maintaining a tight monetary policy by hiking interest rates to
cope with the current rise in inflation, the government also
needed to be contractionary in its fiscal policies.
Although acknowledging the need for more government spending
to help spur economic growth, which has been slowing down due to
rising inflation and interest rates, Kahlil warned that an
expansionary budget should only be pursued if this was in line
with BI's policies.
"This year's unspent budget allocations should not be
disbursed all at once within the first semester of next year in
order to avoid disrupting the macroeconomic stability that is
currently being rebuilt," he said.
Standard Chartered Bank economist Fauzi Ichsan, however, said
that it was increasing government spending that Boediono needed
to focus on for the sake of higher economic growth, as well as
pushing ahead with reform, including more privatization.
In a plenary session of the Indonesian Science Academy on
Saturday, Boediono presented a paper assessing the current
economic situation, in which he underlined the importance of
political and economic harmony, as well as coherent policies
within the government's economic team, if macroeconomic stability
was to be achieved.
He also warned that macroeconomic stability should never be
take for granted, and that prudent budgetary policies, including
reducing the deficit and debt stock, should always be pursued. It
was also essential to press ahead with reform in the area of
governance.
A former central bank deputy governor and National
Development Planning Agency (Bappenas) chief, Boediono is
expected to have no difficulty in working together with BI and
other state officials, as he did during his term as finance
minister under the previous government.
Market analyst Dandossi Matram, however, said it was still too
early to know what to expect of Boediono as his position in the
Cabinet was still not clear.
He said that the positive market reaction following President
Susilo's announcement that he had invited Boediono to join his
Cabinet's economic team had more to due with the perception that
Susilo was on the right track in his Cabinet reshuffle plans to
improve the economy, rather than the "Boediono factor" itself.
"The markets will still wait and see what really comes of the
reshuffle," he said, adding that Susilo's still vague reshuffle
announcement was "merely testing the market."
Bank Negara Indonesia (BNI) analyst Ryan Kiryanto cautioned
the public and the markets not to pin their hopes too high on
Boediono as a macroeconomic savior. "Economic performance will
depend on the cooperation and teamwork of the whole economics
team, not Boediono alone."