Government proposes optimistic 2005 draft budget
Government proposes optimistic 2005 draft budget
Dadan Wijaksana, Jakarta
The government proposed a draft law on the 2005 state budget
to the House of Representatives on Tuesday, outlining higher
economic growth and lower deficit targets.
Minister of Finance Boediono told legislators on the House's
budget commission that strong domestic consumption coupled with
an increase in exports and investment would accelerate economic
growth to between 5 percent and 5.5 percent next year.
The economy is expected to grow by 4.8 percent this year.
"We expect a bigger contribution from exports and investment
next year, to ensure more sustainable growth," Boediono told the
commission, adding that the assumption was realistic provided
there was continuity in the current pace of global economic
recovery.
Boediono was accompanied by State Minister of National
Development Planning Kwik Kian Gie and Bank Indonesia senior
deputy governor Anwar Nasution.
Both Boediono and Kwik acknowledged that such a growth would
be insufficient in significantly reducing the chronic problems of
poverty and unemployment, but said the target was the most
realistic the government could come up with given current
conditions.
Indonesia has around 2.5 million new workers entering the job
market each year, meaning that its economy has to expand by at
least 6 percent to be able to absorb the majority of them.
Analysts have said that only the return of foreign investment
could stimulate the economy to be that dynamic -- a tough task
considering the lack of confidence on the part of investors
toward Indonesia.
The latest data show that in the first quarter of the year,
approvals for foreign direct investment (FDI) fell by 41 percent
to US$1.5 billion from $2.6 billion in the same period of last
year.
Under the draft, the government also set the deficit target at
between 0.7 percent and 0.9 percent of gross domestic product
(GDP), lower than the 1.2 percent estimate for 2004 and the 1.7
percent reached last year.
A number of financing sources have been earmarked to finance
the gap, including from the government's investment funds (RDI),
the sales of assets under the Asset Management Company (PPA) and
privatization, bonds issues and selective foreign loans.
Elsewhere, both Boediono and Kwik stressed that the proposed
draft should serve only as a "baseline budget", which intended to
ensure fiscal sustainability as well as provide enough space for
the next government and lawmakers to make adjustments.
"The government and lawmakers emerging from the elections
could make adjustments on this draft. But we need to proceed with
this to avoid a vacuum for the government," Boediono said.
Indicator 2004 Target Estimate Realization 2005 Draft
Growth (%) 4.8 4.8 5.5-5.5
Inflation (%) 6.5 5.5 5.0-6.0
Foreign Exc. (Rp/US$) 8,600 8,500 8,400-8,600
Oil price (US$/brl) 22.0 24.5 22-25
Oil output (mbpd) 1.15 1.05 1.1
Source: Government data