The government of Indonesia is looking at setting a more realistic growth target in its draft state budget for next year, saying the move is in consideration of the present global economic uncertainty.
Finance Minister Bambang Brodjonegoro has proposed at a recent hearing with the House of Representatives the revision of the national economic target for 2016 from 5.5% to 5.3%, according to a report by state-run Antara News.
“We are proposing to revise down the economic growth target to 5.3 percent in 2016. This is lower than the target we had proposed in the financial notes at 5.5 percent,” the finance minister stated at the hearing.
The finance minister explained that the planned growth target reduction would be more realistic given current global economic developments, especially with the cooling of China’s economy, without lowering optimism over the possibility of improvement in the trade performance of both developing and developed nations.
The optimism derives from global projections of better prevailing economic conditions ahead compared to the past two years. At the same time, however, Indonesia needs to anticipate the possible decline in China’s growth in 2016, said the official.
“China’s economic growth is forecast to slow down from the earlier prediction of 6.8 percent to 6.3 percent. The development of our economy is closely related to the developments in China, particularly our exports and imports. We have to be careful of unfavorable signs,” Brodjonegoro said.
He further said that although the growth target is to be trimmed, economic growth next year will still be supported by government expenditure—which gets a higher allocation in the draft 2016 state budget compared to the previous years—and by investment, which would be boosted by the government’s deregulation packages.
“Household consumption next year is forecast to be only five percent, or equal to the consumption this year, and is even predicted to be slightly weaker. However, government expenditure can help. In addition, the government is making efforts to issue deregulation policies and to streamline the issuance process for business permits. All these measures could boost investment that could lead to growth,” he said.
The growth assumption will be deliberated during the budget meeting by the House Budgetary Board.
Photo: JasonParis
