Southeast Asia’s biggest economy can expect strong growth of 6.2 percent next year despite a global outlook “wrought with challenges,” Indonesian President Susilo Bambang Yudhoyono said yesterday.
Unveiling next year’s draft national budget, Yudhoyono said Indonesia would be able to further its economic transformation while bringing inflation under control and spending more on high civil service salaries and education.
“From its dismal condition 10 years ago, Indonesia has transformed today into a dynamic nation full of hope,” he told lawmakers in a major address two days before the country celebrates independence day.
“However despite all this our nation continues to be impacted by a number of serious trials ... The price of oil has reached the highest level in history. The price of food all over the world has drastically soared,” he said.
The budget predicts economic growth of 6.2 percent with inflation at around 6.5 percent, well down from its current peaks of around 12 percent after hikes in subsidized fuel prices and the surge in commodity prices this year.
Expenditure is expected to rise 13.4 percent to 1,222 trillion rupiah (US$133 billion), while revenue is expected to jump 14.3 percent to just over 1,000 trillion rupiah, the president said.
The government predicts a budget deficit of 1.9 percent of GDP compared with the 1.5 percent to 1.8 percent expected this year, Yudhoyono said.
The deficit stems partly from a 15 percent rise in civil servant salaries and a boost in education funding to 20 percent of spending from around 15 percent this year.
“The budget for education has risen to almost double from 78.5 trillion rupiah in 2005 to 154.2 trillion in 2008,” Yudhoyono said.
The higher cost of living this year hit the liberal ex-general’s poll ratings ahead of presidential elections. Analysts said the speech trumpeted government achievements while setting realistic targets.
“The growth figure forecast by President Yudhoyono is attainable,” Center for Strategic and International Studies political analyst Pande Raja Silalahi said. “This realistic figure is indeed important for the next presidential election. The government will easily reach the growth forecast and Yudhoyono will tell people that he has managed to achieve what he promised.”
The budget would be geared toward stimulating growth, expanding employment and alleviating poverty in a country with about 70 million people living below the poverty line, the president said.
Yudhoyono said the planned 20 percent rise in education spending came “in the midst of the global oil and food price crisis,” which forced the government to approve unpopular fuel price hikes in May.
Stung by soaring oil prices, Indonesia would accelerate development of renewable energy and change course from a “nation that splurges” to one that saves on consumption, Yudhoyono said.
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