Aditya Suharmoko, Jakarta – The government confirmed Friday a plan to revise the economic growth target down from the 6.8 percent stated in the 2008 state budget amid soaring global prices for oil and staple food commodities.
"A downward revision is a must, but we will consider all the plus and minus factors," Finance Minister Sri Mulyani Indrawati told reporters as quoted by Antara newswire Friday. However, she declined to give an exact figure for the new forecast.
On Monday, the central bank said the country's economy would grow between 6.2 percent and 6.8 percent this year.
Mulyani said the latest forecast on the country's macroeconomic fundamentals showed mounting inflationary pressure as domestic consumption continued to suffer from global price increases. "The rising price of staple foodstuffs will hurt the people's purchasing power," she said.
Last month, the country's inflation rate reached to a 16-month high, with a 1.77 percent increase, due to the price rises for key commodities, such as rice, wheat and soybeans. The changes have prompted the government to review its assumptions on key variables – particularly oil prices – in the state budget while issuing new regulations last week to stabilize prices. These include various tax incentives for the food industry.
Facing criticism for its late response, the government announced Wednesday a plan to revise its assumption for oil prices to $83 a barrel from $60 a barrel in the 2008 state budget. The change comes only 36 days after implementation of the budget.
Crude oil prices surpassed $60 per barrel in mid 2006. They are currently hovering around $90 per barrel after peaking at $100 in early January.
The Finance Ministry's latest calculations estimate the government's budget deficit to reach Rp 87.3 trillion (about $9.45 billion), or 2 percent of growth domestic product (GDP), increasing from 1.7 percent in the current state budget.
Mulyani also confirmed, the government would propose a budget revision to the House of Representatives in mid February. It expects the process will conclude in March.
In normal conditions, a state budget is revised in the second semester. The revisions to the key assumptions, many economists said, were a result of poor economic forecasting by the government's economic team, which has led to uncertain growth.
A head economist at the Indonesian Chamber of Commerce and Industry, Faisal Basri, said his team had identified the coming threat of skyrocketing oil prices as early as 2006, but their warning was not taken seriously by the government.