Jakarta – Coordinating Minister for the Economy Boediono said he expected the Indonesian economy to fare well amid a global slowdown, countering projections by the International Monetary Fund (IMF) which has revised 2008 growth projections – including Indonesia's – in a downward direction.
Boediono said the government would stick to its original growth targets of 6.3 percent and 6.8 percent for 2007 and 2008 respectively, on higher investment and exports. "I'm optimistic that the growth rates targeted in the state budget will be achieved," he said, responding to recent economic predictions by the IMF.
The IMF estimated that Indonesia's economic growth in 2008 was likely to reach only 6.1 percent due to a slowing global economy which would eventually affect exports and investment.
The IMF has revised its 2008 projection for global economic grown to 4.8 percent, down from 5.2 percent, amid a projected estimated decline in worldwide demand for goods.
It also projected that United States economic growth would slow from 2.1 percent in 2007 to 1.9 percent in 2008 and that the European Union would drop from 2.5 to 2.1 percent over the same period. The US and the EU represent two of the country's major export destinations.
Remaining upbeat on economic prospects, Boediono said that Indonesia would benefit from investment at rates higher than those projected by the IMF, due to an improving business and investment climate.
According to IMF projections, Indonesian investment in 2008 is to grow by 13.3 percent, higher than the 8.5 percent projected for 2007, while exports are to grow by 10 percent, higher than the 8.7 percent projected the year before.
Boediono may have solid reasoning: Investment Coordinating Board (BKPM) statistics for the first nine months of 2007 show respective increases of 164 percent and 99.1 percent for realized foreign direct investment (FDI) and domestic investment.
Investment accounts for around 20 percent of Indonesia's economy, while consumption and net export make up 65 percent and 10 percent, respectively.
Indonesia's economy needs to grow by at least 6 percent to keep up with its regional peers and reduce poverty and unemployment rates.
With an annual growth rate of 6 percent the economy is estimated to be able to absorb around 2.4 million new workers, approximately the number who enter the job market every year.
Meanwhile, responding to concerns about soaring international oil prices, Boediono said they would not affect assumptions in the 2007 state budget. In the budget, the government assumes an oil price of US$60 per barrel, far lower than current prices which now hover at close to $90.
He said that only three months were left for this fiscal year, so the government's oil and gas revenue as well as fuel subsidies paid out would not be affected much.
"In the earlier months, average prices were quite low, so the price developments will not make much difference to the fiscal balance," Boediono said.
"The government is monitoring the price movements. If prices continue to rise over the long run, then they will then have an impact (on the national economy)."