Govt sets higher growth target of 5% next year
Govt sets higher growth target of 5% next year
The Jakarta Post, Jakarta
The government has set a higher economic growth target of 5
percent for next year under the draft 2004 state budget to be
unveiled by President Megawati Soekarnoputri on Friday,
Coordinating Minister for the Economy Dorodjatun Kuntjoro-Jakti
said.
"President Megawati will deliver the opening speech for the
draft budget and in it, you will see that our next year's target
is 5 percent," he told reporters on Tuesday.
Megawati is also expected to present the government's post-
International Monetary Fund (IMF) economic reform program at the
same time.
Dorodjatun did not give reasons for the rather optimistic
projection, in spite of various uncertainties both at home and
abroad.
During the initial round of talks with the House of
Representatives state budget committee, the government said that
in addition to strong domestic consumption, higher exports and
investments should help push the economy to grow at a higher rate
of between 4 to 5 percent. The government said that an expected
recovery in the global economy would help increase exports and
investments.
The economy this year is expected to grow at around 4 percent.
Some government officials said the increasing stability in the
country's macroeconomic indicators, as reflected in the
appreciation of the rupiah against the U.S. dollar, benign
inflation and a lower Bank Indonesia benchmark interest rate,
should strengthen the confidence of investors in making fresh
investments here.
But many have also said that the 5 percent growth target for
next year was too optimistic, considering that 2004 would be a
"risky period" for the economy, as the IMF's current economic
bailout program expires later this year and the country holds its
first direct general elections in April.
Slow progress in resolving the various problems faced by
foreign businesses in the country and renewed terrorist threats
may cause investors to temporarily shelve their investment plans.
Indonesia's economy has been growing at a modest rate of
between 3 to 4 percent over the past couple of years, mainly
driven by strong domestic consumption amid weak investments and
exports.
Experts have said that for the economy to be able to generate
enough jobs for the millions of people made jobless by the 1997-
1998 economic crisis, the growth rate must be at least 6 percent.
Dorodjatun said that a 6 to 7 percent growth target could be
achieved in 2006 or 2007, depending on the pace of the global
economic recovery.
"To achieve a 7 percent growth target will not be easy because
of the country's huge population, not to mention the impact of
the global economic (recession) and security issues at home,
which has been lately undermined by a number of terrorist
bombings," Dorodjatun was quoted by Antara as saying.
The higher growth rate next year is expected to help the
government cut down its budget deficit to around 1 percent of the
gross domestic product (GDP) from this year's estimated deficit
of 1.8 percent GDP. The government hopes to finance around 70
percent of the deficit through foreign loans.
Assuming that next year's GDP would grow to Rp 2.037 trillion
from this year's estimate of Rp 1.940 trillion, the 2004 deficit
would be Rp 21.34 trillion, which means the government would need
about Rp 15 trillion (US$1.81 billion) in new foreign loans.
Key economic indicators
2003 budget expected 2004 budget*
(target) realization
Growth 4.0 3.5-4.0 4.0-5.0
Inflation 9.0 5.0-6.0 6.0-8.0
Rupiah rate (Rp/US$1) 9,000 8,300-8,800 8,200-9,200
3-month SBI** (%) 13.0 10.0-11.0 9.0-10.0
* Based on initial round of talks with the House
** Bank Indonesia promissory notes