Businesses Project 4% Growth

The Jakarta Globe, Muhamad Al Azhari, February 15, 2009 

Construction workers move a concrete block in a Jakarta apartment project. (Photo: Safir Makki, JG)

The business community remains upbeat that the country will be able to achieve about 4 percent economic growth this year despite the global economic crisis, but that such a rate requires the delivery of a speedy fiscal stimulus package and stable macro-economic indicators. 

“I think we can grow between 3 percent to 4 percent,” Sofyan Wanandi, chairman of the Indonesian Employers Association, or Apindo, told reporters at the sidelines of a forum attended by a number of top businessmen and some political party representatives. 

Sofyan added: “But the government must immediately pour money into the infrastructure sector to stimulate the economy and the market. When people have purchasing power, they can buy our products. 

“The planned spending on infrastructure, the National Program for People’s Empowerment and soft loans for small and medium enterprises will be quite helpful.” 

He criticized the planned spending as being “too slow” in materializing and warned that the long delay would hamper the country’s economic growth. 

The government is planning to deliver a Rp 71.3 trillion ($6.13 billion) fiscal stimulus package, which include Rp 43 trillion in tax relief for the private sector, 

Rp 10.2 trillion for additional infrastructure spending outside of the Rp 70 trillion allocated in the current budget, an additional Rp 600 billion outside the existing Rp 16 trillion budget for the National Program for People’s Empowerment and an energy subsidy. 

The stimulus package is currently pending House of Representatives approval. 

On a separate occasion, James Riady, deputy chairman of the Indonesian Chamber of Commerce and Industry, or Kadin, said that 4 percent growth is reasonable, given the expectation that inflation is likely to ease. “The global situation has been worse than everybody fears, but fortunately the Indonesian situation has not been that bad,” he told reporters on Saturday. Riady is also chief executive of Lippo, which the Jakarta Globe is affiliated with. 

“That’s a relief. I think it’s quite reasonable that they would achieve about 4 percent [of growth] because remember, inflation is also coming down. That will help the GDP at that level.” 

Central Statistics Agency, or BPS, figures released on Feb. 2 showed that year-on-year inflation eased to a nine-month low of 9.17 percent in January, while on a month-on-month basis, prices fell by 0.07 percent in January, compared with a fall of 0.04 percent in December. 

Bank Indonesia Governor Boediono told a hearing at the House on Thursday that the central bank expects inflation rate to keep easing to around 5 to 7 percent by the end of this year, helped with lower administered price — the price that the government controls such as fuel — and therefore helps maintain healthy consumer spending. The economy is still largely driven by household consumption. 

BI’s senior deputy governor, Miranda Goeltom, had said that the central bank is still considering 4 percent to 5 percent growth, with a possibility of hitting a 4.5 percent midpoint, realistic if the government disburses the stimulus faster. 

The Finance Ministry on Thursday downwardly revised its economic growth targets in the 2009 state budget. The ministry now projects 2009 growth of 4.2 percent to 4.7 percent, down from the 6 percent in the budget approved by the House last year.