Aditya Suharmoko, Jakarta – President Susilo Bambang Yudhoyono on Wednesday said the government would cushion the country against the impact of the global economic downturn by providing an expansive stimulus package and sponsoring massive infrastructure projects.
"We are preparing a new stimulus package," Yudhoyono said at a press briefing on Wednesday, adding the package would be in addition to spending planned for in the state budget.
Finance Minister Sri Mulyani Indrawati, who accompanied Yudhoyono at the briefing, said the government could add to the amount of the fiscal stimulus to revive businesses, which were expected to be hit hard by the global slump.
The package, she went on, would be taken in part from the surplus of the revised 2008 state budget – about Rp 20 trillion (US$1.76 billion). This amount excludes some Rp 12.5 trillion in the state budget for waived income tax, value-added tax and import duty.
Mulyani also said the government would study which industries were applicable for the assistance.
Indonesia, Southeast Asia's largest economy, will have to rely heavily on domestic consumption by its 230 million people to stem the fallout from the global meltdown, which is already taking a toll on Indonesian exporters due to a drop in global demand. Domestic spending accounts for more than 70 percent of the economy.
Yudhoyono, who faces an election this year, said the stimulus package would be designed to match the state budget and the impact on the economy, with the government not borrowing money from foreign parties unless it was to support the economy. "It's hard to get loans now," he said.
While remaining optimistic the economy would grow by more than 4.5 percent in 2009, Yudhoyono also called for a boost in government spending on infrastructure, which would mostly be carried out by the Transportation Ministry, the Public Works Ministry, the Agriculture Ministry and the Energy and Mineral Resources Ministry.
The Public Works Ministry and the Transportation Ministry have been allocated Rp 32 trillion and Rp 16 trillion, respectively, for infrastructure projects.
Yudhoyono also said the government would prioritize job creation, fighting inflation, cutting the fuel subsidy, protecting the poor and ensuring sufficient food reserves – issues which will definitely sell ahead of the elections.
The elections are seen by many as a blessing for the economy, with political parties and legislative and presidential candidates expected to spend big on campaigning, including for T-shirts, flyers, advertising, food and transportation costs for supporters.
Yudhoyono said he expected more optimism in 2009 because of the boost the elections would give to the economy. "Elections regenerate the economy. Do not view 2009 with despair," he said.
The country's economy may grow by between 4.5 percent and 5.5 percent this year, lower than the 6 percent predicted for 2008.