RI NEEDS TO PREPARE STEPS TO FACE GLOBAL CRISIS

By Andi Abdussalam

Jakarta, Oct 22 (ANATARA) -  Many economists have predicted a downward correction of  world economic growth in 2012 and Indonesia has thus been well advised to take whatever steps are necessary to anticipate the impact of the expected global downturn.          Consequently,  the Indonesian government is now continuously  monitoring  world economic developments and devising measures to protect the national economy from any  possible adverse effect of the upcoming economic slump.          "The global economic crisis has several times  cut world economic growth. If we do not do our homework, the decline  in  economic growth in Europe, the United States and Asia will impact on and cut our economic growth," Coordinating Minister for Economic Affairs Hatta Rajasa said.          Hatta said that one of the anticipatory efforts that could be made was to maintain and improve the investment climate, enhance the domestic market and maintain the people's purchasing power with strong commitment to the principle of  prudence.          "We have to take anticipatory steps while  we are now still OK and investors still  come here enabling investment to  increase. The main task at hand  is how to enhance the domestic market, keep it stable and sound, and maintain the people's purchasing power. This must be done," Hatta  said.          He said the government would also increase its budget allocation for fiscal risk reserves which in the current 2011 revised state budget amounted to Rp4.7 trillion. In the  2012 draft state budget it was raised to Rp15.8 trillion.          In a meeting with the House of Representatives (DPR)'s budgetary body the government even had proposed an additional allocation of Rp1.6 trillion for the fiscal risk reserves.          "Our fiscal risk reserves are big and have reached Rp15 trillion, We are still discussing how to prepare  project-optimizing funds, but in my mind the correct priority must be given to the very important sectors, for example, food, irrigation and the creation of new rice fields," he said.          He explained that the latest developments on the projection of the Asian economic growth (which had been corrected downward by the International Monetary Funds/IMF), did not actually describe the real condition because it was made  based on concerns only over the world economic growth projections that had been corrected downward for several times.          However, Hatta was still optimistic that the economic growth in 2011 still could reach 6.5 percent and if there was no serious turmoil it would reach 6.7 percent in 2012.          "This year Indonesia will have a 6.5 percent economic growth and next year the economic growth will reach 6.7 percent," he said.           Economic observer of PT First Asia Capital Ifan Kurniawan said not long ago that d, Indonesia's economy would grow by 6.8 percent in the second semester of this year, which is higher than that in the first semester which is recorded at 6.5 percent. After all, the government will disburse big capital expenditures because in the second semester it has to do many projects      "The government is likely to spend more capital expenditures on infrastructure development while foreign investment in the domestic markets is increasing, it even has entered the real sector,"  Ifan Kurniawan said.          So far, foreign business players only liked to put money in the portfolio investment such as in the stock and money markets, bonds and Bank Indonesia (BI/the central bank) instruments, yet they have now entered the real sector, he said.          Therefore, he said, Indonesia's economy will grow by 6.8 percent in the second semester. "We are optimistic that the country's economy will grow and record better performance," he said. Indonesia is seen by investors as a good place to relocate their business production.          He said that the better economic performance would had convinced foreign investors that Indonesia's economic conditions were increasingly improving. Moreover, Indonesia's economic growth is seen as natural.          Yet, an IMF report has mentioned that the Asian region is facing risks as a result of the debt crisis in Europe and the economic slowdown in the United States. The IMF predicted that the economic growth in Asia would be recorded at 6.3 percent in 2011 and 6.7 percent in 2012, or lower than the previous prediction of 6.8 percent and 6.9 percent in 2012.          The downward correction in the economic growth projection indicated that the escalation of economic crisis in Europe had obvious impacts on macroeconomic and financial developments in Asia.          In an effort to face economic turmoil and further develop the country?s economy, the government is also launching a master plan for the acceleration and expansion of economic development.          However, the Master Plan for Acceleration and Expansion of Indonesia's Economic Development (MP3EI)  will need stability in its implementation. "Economic and political stability is the key factor to the good implementation of KP3EI," Nina Sapti, member of the National Economic Committee (KEN), said in a discussion on the MP3EI and the absorption of the state budget in the face of global crisis recently.          Financial Director of Reform Institute Muhammad Husni Thamrin said Indonesia was seen by many parties as a country which had a good political stability. "Many countries see Indonesia as an ideal state which has a better political stability if compared with, for example, Thailand and Malaysia," Husni Thamirin said.***5*** (T.A014/A/HAJM/17:20/a014) 22-10-2011 17:22: