Growth could return to 6% in 2003: Govt
The Jakarta Post, Jakarta
Minister of Finance Boediono said on Tuesday that the country's economic growth could return to the precrisis level of 6 percent next year on the back of an improved political situation at home and rapid progress in the bank restructuring program.
He added that a recovery in the global economy would support growth in the gross domestic product (GDP).
Boediono painted a bright outlook when presenting the 2003 state budget draft at a hearing with House of Representatives Commission IX on the state budget and finance.
He told legislators that the government was targeting an economic growth of 4 percent to 6 percent in the draft budget.
This year, the economy is projected to grow by 4 percent. But experts have said that in order to absorb the huge unemployment created by the 1998 economic and financial crisis, the economy must grow by at least 6 percent. The economy contracted by 14 percent in 1998.
Boediono explained that a better political and security situation and the quick recovery of the banking sector's intermediary role would help trigger economic activities.
He said this would be supported by a rapid recovery in the global economy, signaled by better growth for the world's leading economic superpowers, such the U.S., Japan and the European Union.
He added that the global economic recovery would help improve the country's export performance, and help boost the flow of foreign investment.
Increases in exports and investment, coupled with a robust consumption, were all expected to accelerate the country's economic growth, Boediono said.
The country's export performance has been discouraging since last year due to the global economic slowdown. Exports were very strong in 2000, which was the main contributor to the phenomenal economic growth of 4.8 percent.
This year's economic growth is expected to be mainly driven by domestic consumption.
Elsewhere, Boediono told lawmakers that the government was targeting a lower deficit in next year's state budget.
The current state budget assumes a deficit of 2.5 percent of GDP.
The lower deficit, Boediono said, was possible because of declining subsidies and lower interest rate, which reduced the burden on the state budget in covering the coupon rate of massive government bonds issued to bail out ailing banks.
Other budget assumptions for next year also include: rupiah exchange rate of Rp 8,500 to Rp 9,500 per U.S. dollar, inflation at 7 percent to 9 percent, an interest rate on Bank Indonesia three-month SBI promissory notes of 12.5 percent to 14.5 percent and oil prices at $19 to $22 per barrel.
Elsewhere, Boediono also expressed optimism that the country would be able to meet the growth target of 4 percent under the current good climate, as evidenced in encouraging macroeconomic indicators.
Improved macroeconomic indicators are indicated by the firmer rupiah against the dollar, a relatively manageable inflation rate, and a downward trend in the Bank Indonesia benchmark interest rate.
Discussion on the draft state budget is still at the preliminary stage. The House is expected to pass the draft budget into law on Oct. 30.