The ministry of industry has revised down the country's industrial growth target for the third time in five months to between 4.5 and 5 percent in response to the government's plan to increase fuel prices.
The fuel price increases, expected to happen in June by an average of 28.7 percent, would raise industrial production costs by an average of 5.69 percent, the ministry said.
"The revision is inevitable due to the planned increase of fuel prices and other infrastructure problems," Syarif Hidayat, head of land and air transportation equipment industries at the ministry, said Monday.
At the beginning of the year, the ministry set the industrial growth target at 7.4 percent, which was revised to 6.5 percent and then 6 percent in April.
Syarif said higher fuel prices would significantly curtail consumer purchasing power.
The last time fuel prices were raised, by an average of 125 percent in October 2005, car sales plummeted to 318,904 units in 2006 after reaching a record high of 534,000 in 2005.
He also said a weakening global economy would affect the country's exports and overall economic growth, significantly curbing industrial output.
The government is eying an economic growth target of 6.4 percent this year, although Finance Minister Sri Mulyani Indrawati said growth may only reach 6 percent because of the impact of the planned fuel price rises.
Dedi Mulyadi, head of research and development at the Industry Ministry, said 5 percent industrial growth could only be achieved if the automotive, transportation equipment, machinery and tools industries grew by 12 percent
He said the food, beverages and tobacco industries must grow by 3 percent.
Dedi reported that the industrial sector grew by 4.61 percent in the first quarter, down from 5.83 percent in the same period last year.
First quarter growth was supported by 1.26 percent expansion in the food, beverages and tobacco industries, 7.1 percent in the textile, leather goods and shoe industries, 0.53 percent in the wood and forest-based industries, 1.01 in the cement and non-metal mining products industries and 6.88 percent in the recycled handicrafts industry.
Rising prices of primary commodities in the global market and the public's weakening purchasing power adversely affected the food, beverages and tobacco industries, Dedi said, adding that the textile, leather goods and shoe industries continued to suffer from illegal imports.(anw)
Find Article by Date