Indonesian govt upbeat over economic growth this year

Indonesian govt upbeat over economic growth this year

Photo document of toll road infrastucture development in Indonesia. (ANTARA/Ismar Patrizki)

"Declining commodity prices will reduce revenues from exports."
Jakarta (ANTARA News) - The World Bank has reminded Indonesia to keep a watch on the global economic crisis and prepare anticipatory steps to maintain its relatively high economic growth which stands at about six percent this year.

"Indonesia needs to remain alert and be careful. Overcast skies will be followed by rains and storms. Similarly, Indonesia must prepare for unforeseen risks and take anticipatory steps to minimize their impact," said World Bank Director Sri Mulyani on Thursday (July 12).

Yet, Finance Minister Agus Martowardojo is optimistic that Indonesia`s economic growth at the end of 2012 will be above 6 percent despite the ongoing global economic crisis. "I am optimistic that Indonesia`s economic growth will be above six percent this year regardless of the financial crisis in Europe," he said.

However, economic analyst Lana Soelistianingshi has predicted that although the country has a chance to boost its economic growth to a relatively higher level, Indonesia will not be able to achieve its economic growth target of 6.5 percent.

"This is because it is still slow in implementing its economic development program, particularly in developing its infrastructure to support what it calls the Master Plan for the Acceleration and Expansion of Indonesia`s Economic Development (MP3I)," explained Lana, chief economist of Samuel Sekuritas firm.

She also claimed that to achieve an economic growth of over 6 percent, the Indonesian government must develop adequate infrastructure, such as the construction of the Rp225 trillion Sunda Strait Bridge that will connect Java and Sumatra islands.

"I am convinced that if the Sunda Strait Bridge is built soon, Indonesia`s economic will grow by 6.5 percent because of its definite impacts and implications on the country`s economic developments," she said.

According to Lana, uncertain global economic conditions are another factor that could slow the country`s economic growth. Indonesia`s commodities, such as coal, crude palm oil, rubber and copper exports have continued to drop. If the world economy is slowing down, the prices of Indonesia`s commodities will also decline.

The economies of Indonesia`s major importers such as China and the United States are also predicted to weaken during this time. "Declining commodity prices will reduce revenues from exports. Thus, the World Bank has begun to revise downward Indonesia`s economic growth," she said.

"Despite its strong growth compared to that of other developing countries owing to its strong domestic consumption and investment, Indonesia would not be able to avoid the impact of global economic slowdown, especially if prices of world commodities and demand from countries such as China are affected," revealed World Bank`s country director for Indonesia Stefan Koeberle in a press statement earlier.

Yet, Stefan Koeberle is convinced that Indonesia will be able to surpass the current global economic crisis with its six percent growth this year. "The Indonesian government has made important progress such as preparing a crisis management protocol and regulating contingency funds for the government in case of the crisis," he added.

In spite of this, the World Bank reminded that Indonesia should remain careful. World Bank Director Sri Mulyani Indrawati said Indonesia should be vigilant with regards to the global economic crisis, so that it will be able to take anticipatory steps over possible outcomes.

The WB director said Indonesia`s economic growth in the first semester of this year was quite high when compared to the average growth rate of the world in recent days. She also said that Indonesia`s ability to maintain momentum seemed to be relatively strong.

"We predict that Indonesia`s economic growth at present will still be over six percent," she said. She reminded, however, that the risks emerging from the global economic crisis during the second semester of this year might be found in a number of sectors.

Seemingly, Europe still needs time to overcome the current condition, particularly with regard to policy making. Weak policies have the potential to become precursors for different crises that could affect confidence in the world economic development.

She said one cannot predict when this may happen. However, it is almost certain that such a crisis will take place. "What the government can do is to keep a watch and make calculations to minimize its impacts."

Moreover, the United States economy still faces a litmus test. In the meantime, the slowing Chinese economic growth has had a negative impact on Indonesia`s economic developments at the end of the second semester of 2012, the results of which might further be felt in 2013.

Finance Minister Agus Martowardojo, however, has predicted that the Indonesian economy will perform better in the second semester when compared to its 6.3 percent growth seen during the first semester.

"Usually the economic growth in the second, third and fourth quarters is higher than that of the first quarter," he said.

Therefore, to increase its economic growth the government will speed up capital spending and raise the limit of untaxed income as a fiscal stimulus, he said.

"If the stimulus in the form of expedited infrastructure financing is disbursed, it will surely cause our economy to perform better. Likewise, the plan to raise the limit of untaxed income will boost the people`s economy," he said.

He expressed optimism that economic growth was still relevant to the assumed economic growth rate of 6.5 percent in the revised 2012 state budget and would not be affected by the lingering European economic crisis.

Meanwhile, Deputy Chairman of the Prosperous Justice Party (PKS) Faction of the House of Representatives (DPR) Sohibul Iman hailed the country`s economic growth that stood at 6.5 percent in 2011.

"This is a good growth trend that's continued to rise from 6.1 percent in 2010 and 4.6 percent in 2009," he added.

The PKS House Faction chairman said that the government needs to maintain this upward economic growth trend amid uncertain global economic conditions.

He also appreciated the government`s success in tackling the inflation rate by bringing it under control at only 3.79 percent in 2011, which was far lower than the assumed figure of 5.65 percent during the 2011 state budget. The inflation rate had touched 6.96 percent earlier in 2010.

"We ask the government to work and consistently cooperate with Bank Indonesia in curbing inflation at a lower rate in an effort to ensure better purchasing power for the people," he concluded.***2***