Economic growth in 2016 is targeted to reach 5.5 percent."
Jakarta (ANTARA News) - The government must now begin preparing actions in response to its work plans based on the macroeconomic assumptions set in the draft 2016 state budget.

These efforts must be made amid gloomy economic developments both at home and across the world. After all, Indonesias rupiah currency has continued to depreciate against the US dollar.

"The government should accelerate the development of import substitution industries and expedite the development of downstream industries for boosting exports," Enny Sri Hartati, the director of the Institute for Development of Economics and Finance, noted on Friday last week.

She said the government should start making preparations in the second semester of 2015 and should focus on developing import substitution and downstream industries in the face of its work plans for 2016.

Policies must be prepared in response to the 2016 budget assumptions, particularly the rupiah exchange rate, which was set at Rp13.4 thousand per US dollar.

"The Rp13.4 thousand exchange rate assumption is no longer a matter of whether it is realistic or not, but of how to prepare the required policies to achieve it next year," Hartati affirmed.

She cited as an example the measure adopted by China to handle the situation, wherein the country devalued its Yuan in a bid to increase the performance of its exports.

Therefore, the Indonesian government should now start formulating its policies to boost exports and to capitalize on the weakening rupiah.

President Joko Widodo (Jokowi) announced the governments budget plan for 2015 and its macroeconomic assumptions before a plenary session of the House of Representatives last week.

The government set the economic growth for 2016 at 5.5 percent, inflation at 4.7 percent, the rupiah exchange rate at Rp13.4 thousand per US dollar, the average rate of treasury bills at 5.5 percent, Indonesian crude oil price at US$60 per barrel, and oil and natural gas lifting at 1.985 million barrels of oil equivalent per day.

"Economic growth in 2016 is targeted to reach 5.5 percent," President Jokowi noted in his address while presenting the governments statement on the bill on the state budget for the 2016 Fiscal Year and its financial note before the plenary session of the House of Representatives (DPR) on Friday, August 14.

The president affirmed that the global economic conditions were projected to recover, and thus, the performance of exports and imports and the global demand for Indonesian products would also increase.

"Infrastructure development is also expected to boost the performance of the gross fixed capital formation and the national consumption," Jokowi affirmed.

Finance Minister Bambang Brodjonegoro expressed optimism that the government would achieve the 5.5 percent growth target set for 2016.

"The global growth is forecast at 3.8 percent. It is quite high compared to only 3.3 percent this year. This indicates that global prospects will be comparatively better next year. This is what led us to set the target at 5.5 percent," he explained.

Several steps need to be taken to achieve the target, including maintaining the publics purchasing power, he added.

"How will we meet the 5.5 percent target? The key to it is maintaining the purchasing power of the public, especially household consumption. We will aim to make it grow to around 5 percent," he stated.

Other required efforts include boosting both domestic and foreign investment. "Private investment must be prioritized and both foreign direct investment and domestic investment must be improved," the minister emphasized.

According to President Jokowi, improving national connectivity and reallocating expenditures to the productive sectors were also expected to stimulate the national economy, maintain the purchasing power of the people, and control the inflation rate.

The government also projected the inflation rate in 2016 at 4.7 percent. "This inflation is subject to the influence of various factors, such as price fluctuations in global food commodities and energy, the shifting of exchange rate, and climate change, among others," he added.

Energy observer Komaidi Notonegoro from the ReforMiner Institute described the oil lifting target of 830 thousand barrels per day set in the 2016 draft state budget as realistic.

Notonegoro stated that the target is realistic as the country would have additional production from the Banyu Urip field of the Cepu Block.

President Jokowi noted in his budget speech at the parliament on Friday that the target for oil lifting is set at 830 thousand barrels per day for 2016.

Meanwhile, natural gas lifting target is set at 1.55 million barrels of oil equivalent per day, and the price of the countrys marker crude is set at US$60 per barrel.

Notonegoro stated that apart from the additional production from Cepu, the government is expected to continue to rely more on the production from old wells.

Currently, the Banyu Urip field in Bojonegoro, East Java, has a production capacity of 185 thousand barrels per day, with daily production averaging 80 thousand barrels. The production is to be raised to 149 thousand barrels per day by the end of August and to 205 thousand barrels in November, 2015.

Notonegoro forecast that the oil prices would remain low in the world market in 2016.

The estimated price of the countrys crude at US$60 per barrel is quite conservative, he noted.

Reporter: Andi Abdussalam
Editor: Priyambodo RH
Copyright © ANTARA 2015