JP/13/budget

JP/13/budget

Govt paints upbeat picture for 2006

Urip Hudiono
The Jakarta Post/Jakarta

The government unveiled on Wednesday macroeconomic indicators
that would become the basis for the drafting of the 2006 state
budget, casting for higher economic growth, and lower inflation
and deficit targets compared to 2005.

The government is also optimistic that the rupiah will be
stronger next year, but has taken into consideration the
country's declining oil production.

Speaking at the opening of a three-day National Development
Planning Plenary Meeting to draft next year's Government Action
Plan (RKP), Minister of Finance Yusuf Anwar said the government
expects the economy to grow at 6.1 percent on improving exports
and investment, in addition to stronger domestic consumption.

"The economy will grow faster, from 5.5 percent this year to
between 5.5 percent and 6.5 percent in 2006," he said.

"The inflation rate, meanwhile, will be in the range of 4.5
percent and 6.5 percent, with the rupiah stabilizing in line with
our economy's improving competitiveness."

In a revision to the 2005 budget -- scheduled for deliberation
by the House of Representatives next month -- the government is
projecting economic growth of 5.5 percent, from a previous 5.4
percent.

Faster economic growth is crucial in helping the country deal
with chronic poverty and unemployment. Every 1 percent of
economic growth is calculated to be able to absorb up to 400,000
new workers.

Each year, up to 2.5 million new workers enter the job market.

The government also revised upward the country's on-year
inflation rate to 7.0 percent from 5.5 percent, while setting a
deficit target of 0.8 percent.

Yusuf explained that the government's fiscal policies for next
year would continue this year, outlining further fiscal
consolidation efforts in terms of the deficit and the country's
debt ratio, while implementing more effective and manageable
state financing schemes.

"The government aims to continue lowering the budget deficit
gradually, from 0.8 percent this year to between 0.5 and 0.7
percent next year," he said.

"We will also decrease the country's debt to gross domestic
product (GDP) ratio from 47.5 percent this year to between 42.5
percent and 43.3 percent next year."

Yusuf explained that implementing sustainable state financing
schemes was important, and it would be one of the main challenges
in achieving next year's targets, with the state experiencing
decreasing revenues and increasing expenditures.

State expenditure this year alone is estimated to reach Rp
463.3 trillion (US$48.7 billion).

"Our opportunity to offer government bonds to help finance the
budget is becoming more limited, as the (bond) market could
become saturated," he said.