Govt to launch stimulus package
Govt to launch stimulus package
The Jakarta Post, Jakarta
The government is planning to introduce a stimulus package to
help revive investments and cushion the economy from the impact
of the latest terror attack in the country.
"God willing, there will be an economic package to help boost
business activities, as well as investments. It'll be like a
stimulus package to improve our investment climate," Minister of
Finance Boediono told reporters on Wednesday.
The planned package, Boediono said, was needed as economic
growth would depend on investment and business activities.
Analysts have said that the deadly bomb blast at the JW
Marriott Hotel would further hurt confidence in the ailing
economy as nervous investors might shelve investment plans and
the local corporate sector could find problems in raising cash
overseas.
Boediono did not provide details. It is still unclear whether
the stimulus would be in the form of a tax-break facility for
businesses or other measures such as streamlining the
bureaucracy.
Boediono also did not elaborate as to the impact of such a
plan on the state budget as any stimulus -- which could either
cause higher spending or lesser revenue -- would put more
constraint on the already tight budget.
However, according to economist Raden Pardede, as far as the
2003 budget was concerned, fiscal stimulus was feasible, without
having to harm the estimated full-year budget deficit given the
modest figures posted during the first semester of this year.
The state budget has targeted the deficit at Rp 34.4 trillion,
but it booked only Rp 2.5 trillion in actual deficit as of June.
"Such low (budget) deficit realization should give greater
room for the government to improvise by providing a sort of
stimulus to pick up the pace of economic development," said the
economist from the Danareksa Research Institute.
A well-arranged fiscal stimulus, be it in the form of higher
share of the development spending or various dispensation
facilities, would not create a crash in the budget.
But more importantly, Raden added, it would provide a
confidence boost to the business community and therefore the
economy as a whole, at a time when they needed it most.
Stimulus has been familiar to the government recently.
Following the Bali bombing incident last year, a Rp 10
trillion (US$1.22 billion) stimulus package was provided to help
cushion the economic impact, the amount of which was added into
allocation of development spending.
During 2003, the government has also twice introduced stimulus
to improve the business climate, both in the form of tax-break
facilities for certain industries. The first, worth around Rp 6
trillion, was issued in January, in which the luxury tax on 45
products, mainly electronics, was eliminated.
The second was in May, when the government decided to waive
the 10 percent value added tax (VAT) on the import of certain
capital goods and raw materials such as machinery and factory
equipment, along with raw materials for the agricultural,
fishery, forestry and animal husbandry sectors.
Elsewhere, Boediono reiterated that despite the bombing
incident and measures to minimize the impacts, the 2003 state
budget would remain "safe", and unaffected by the event. He said
that the budget deficit target of 1.8 percent of gross domestic
product was still achievable.
Meanwhile, Daniel Citrin, visiting senior advisor of the
International Monetary Fund (IMF), which called the blast as a
"terrible tragedy" to the economy, had full confidence in the
government's ability to restore economic stability.
"I'm sure the government will do whatever it needs to do to
stabilize the situation, and to maintain its economic program
remains on course," Citrin said without elaborating whether the
necessary actions include introducing another stimulus.
Coordinating Minister for the Economy Dorodjatun Kuntjoro-
Jakti was confident that the country's economic recovery remain
on track. "The recovery after the Bali bomb was faster than
expected, showing our economy's resilience," he said.