Jakarta, Sept 21 (Antara) - In the face of major and complex external challenges next year, the economic growth target set at 5.5 percent in the draft 2016 state budget needs to be revised.
"The government of President Joko Widodo is facing complicated external challenges. After all, he formulated his Nawacita (nine national priority) programs before the external challenges emerge. In the 2016 draft state budget, the growth target is set at 5.5 percent. It is likely to be revised down to 5.2 percent," economist A. Prasetyantoko of the Atma Jaya Catholic University noted on Tuesday, last week.
Prasetyantoko explained that an economic growth target set in range of 4.7-4.9 percent is reasonable amid the sluggish economic conditions.
The economist stated that the external challenges, which had affected the economic growth in 2015 and were forecast to protract until 2016, included the weakening of China's economy that had affected commodity prices; the global economic turmoil; and the Fed's plan to raise its interest rates.
Finance Minister Bambang Brodjonegoro remarked that the economic growth assumption set at 5.5 percent in the 2016 draft state budget could be revised down in keeping with the economic conditions and uncertainties next year as a result of the unfavorable global economy.
"The global economy still faces pressures. We hope to discuss it further and look at the latest developments on how far the global economic dynamism will go," the finance minister stated at a hearing with Commission XI on financial affairs of the House of Representatives (DPR) on Tuesday last week.
Brodjonegoro made assurance that a realistic economic growth assumption would be set in accordance with the latest conditions and consensus with the DPR. This is because the 5.5 percent target is no longer realistic in view of the 2016 economic conditions.
Virtually, the growth target set at 5.5 percent in the draft 2016 state budget could still be achieved if the global economic conditions did not drastically impact the domestic economy, according to Brodjonegoro.
"The 5.5 percent assumption could be achieved if the global economy is improving as it will, in turn, also improve the country's export and investment performance. The investment could be boosted by both the government and the private sector, while consumption would remain high and stable," the finance minister said.
In this case, the government will continue to make improvements and maintain the people's purchasing power, so that household consumption would contribute significantly to the economic growth in 2016.
"To maintain a stable consumption level, inflation should continue to be curbed while implementing programs relating to the people's welfare and social protection apart from carrying out policies on non-taxable income," he affirmed.
The economic growth, which slowed down this year as a result of global economic pressures, has caused the 2016 economic projection to be not as optimistic as forecasted by the government and Bank Indonesia (BI/the central bank).
In the meantime, the BI has revised down its 2016 economic growth forecast from a range of 5.3-5.7 percent to 5.2-5.6 percent. The Indonesian central bank made the revision in the face of uncertainties in global economic developments.
"The 5.2-5.6 percent range is slightly lower than the previous BI target set in the range of 5.4-5.8 percent. This is in line with the low global trade volume and low global commodity prices," BI Governor Agus Martowardojo pointed out.
Although the BI has revised down its economic growth prediction, Martowardojo is confident that next year, the growth would be better than this year, which is forecast to be in the range of 4.7-5.1 percent only.
According to the BI, a global economic recovery would depend on the economic performance of developed countries. The world economy next year is expected to grow at 3.8 percent, higher than 3.3 percent forecast for 2015.
"The global economic growth is expected to have an impact on the nation's economic performance," Martowardojo stated.
For 2015, the BI has forecast that Indonesia's economic growth would lie in the range of 4.7-5.1 percent. This range has also been revised down from the previous forecast of 5-5.4 percent.
The country's economy grew below 5 percent in the first and second quarters of this year, but it is expected to grow higher in the third and fourth quarters.
"The growth will improve in the third and fourth quarters as it would be boosted by the acceleration of government expenditures, realization of infrastructure development, and the government's special efforts to expedite capital spending with the issuance of the economic policy package in September," the BI governor noted.
In the meantime, economist Faisal Basri of the University of Indonesia lauded the government's plan to expedite the realization of its budget expenditure.
However, he pointed out that in the final three months of 2015, the stimulus provided by the realization of the budget will not significantly help the economy.
"We cannot yet be free from private investment. Therefore, deregulations must be implemented seriously," he added.
He forecast that Indonesia's economic growth can be accelerated to reach 5.4 percent in 2016, although global economic pressures will still exist.
Speaking at a discussion organized by a private radio station on Wednesday night (Sept 16), Basri stated that the flow of investment, which is forecast at six percent in 2016, will become the main driver of the country's economic growth.
"We will strongly feel the impact of deregulation in the field of investment next year," the economist noted.
Besides investment, household consumption will also support economic growth in 2016. This is only possible if the government is able to restore the purchasing power of the people and raise household consumption to five percent after it dropped to 4.9 percent in the second semester of 2015.
He remarked that one of the effective steps to restoring the purchasing power of the people is to lower the price of premium gasoline. On the other hand, the global crude price is showing a downward trend. ***4***(T.A015/INE/o001)(T.A014/B/BESSR/O. Tamindael) 21-09-2015 12:57: |
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