Jakarta – Against the backdrop of a possible US recession, which has sent stock markets across the globe tumbling, the government is preparing measures to safeguard the country's economic stability.
"With this situation, the indicators in the state budget, and for economic growth and stability have changed drastically. Furthermore, we can almost be sure that there will be a US recession as we see the ongoing prospects," Coordinating Minister for the Economy Boediono said after a meeting with other top government officials.
Analysts have predicted that the United States, the largest economic power in the world, may suffer a recession triggered by housing and credit woes that would hurt the country's demand for imports. "We will safeguard the state budget as the country's economic anchor to anticipate this situation," Boediono said.
The rupiah fell to Rp 9,475 against the US dollar from Rp 9,460 the previous day. Meanwhile, the Jakarta Composite Index fell the most in five years by 7.7 percent to close at 2,294.52, following falls in other markets in the world.
Other Asian countries' stock markets also suffered a decline. The stock index in Hong Kong dropped 8.7 percent, South Korea 4.4 percent, Shanghai 7 percent, Tokyo 5.7 percent and India 6.12 percent, after it was shut down temporarily.
"At present, the world's economy is facing uncertainty," said Boediono. "However, if we can maintain our efforts to develop infrastructure projects and improve the country's investment climate, I believe our economy will remain resilient."
The government, he said, would focus on developing infrastructure and stabilizing the prices of staple foodstuffs at home to help keep the economy growing.
Infrastructure development is an essential factor for economic growth as it helps to reduce costs, while surging prices of staple foods will affect the inflation rate and eventually people's purchasing power.
Boediono was however upbeat that Indonesia would only be slightly affected by the US recession as the price of the country's top commodities, including those from the energy, agriculture and mining sectors, kept increasing due to high global demand.
Similar optimism is also shared by Finance Minister Sri Mulyani Indrawati, who said that the government would maintain the budget deficit at 1.7 percent of the gross domestic product, or Rp 74 trillion.
"The government will seek more revenue from the oil and gas sector, commodity exports and state-owned enterprise profits, as well as tax and non-tax incomes, to cover the deficit," she said.
Mulyani said the government this year had also allocated Rp 75.5 trillion to subsidize the energy sector and Rp 22.2 trillion to other sectors. (adt)