Growth could return to 6% in 2003: Govt

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.