Linda Yulisman and Tassia Sipahutar, The Jakarta Post, Jakarta | Headlines | Fri, January 23 2015, 8:42 AM
With no signs of quick recovery in the global economy, the government is uncertain that the nation will achieve its economic growth target for 2015.
Speaking during a hearing with members of the House of Representatives on Thursday, Finance Minister Bambang Brodjonegoro said the government would be realistic with recent developments in the global economy.
He said the slow recovery of the world’s economy, the fall in oil prices and the sharp depreciation of the rupiah could further affect the government’s economic growth target.
“Changes in global oil prices and exchange rates are beyond the government’s control. So we are going to be realistic and monitor the status of those two variables,” he said during deliberations on the revision of the 2015 state budget with the House’s Budget Committee.
He said the government was aware that the downturn in the global economy would affect emerging markets including Indonesia. “It seems that the global economic outlook is not as bright as we had first thought,” Bambang said, citing the IMF’s latest World Economic Outlook report.
In the report, which was published on Jan. 19, the IMF revised its global economic growth outlook to 3.5 percent, down from its estimate of 3.8 percent last October.
The IMF also revised the growth projection for ASEAN-5 — comprising Indonesia, Malaysia, the Philippines, Thailand and Vietnam — to 5.2 percent, down from an early estimate of 5.4 percent made last October.
The IMF followed in the footsteps of the World Bank (WB), which cut the global economy growth rate projection to 3 percent on Jan. 13, down from its former forecast of 3.4 percent made in October.
In December, the WB also lowered its projection for Indonesia’s economic growth in 2015 to 5.2 percent from 5.6 percent due to the weak outlook for fixed investment and trade along with the slowing pace of loan expansion. For 2014, the WB revised Indonesia’s GDP forecast to 5.1 percent from 5.2 percent.
Indonesia’s GDP expanded 5.01 percent in the third quarter on a yearly basis, the slowest pace since 2009, as the pace of investment and net exports slowed.
In the revised 2015 state budget, the government maintained its GDP growth target of 5.8 percent, despite the lower economic growth projections made by the two financial agencies.
Meanwhile, Bank Indonesia (BI) Governor Agus Martowardojo warned of “twin shock” risks to the global economy caused by weakening commodity prices and the possibility of capital outflow from the country as the improvement of the US economy could result in an increase of the interest rate, which could then lure away funds from emerging markets.
“We should consider those factors that will affect our own economy,” he said during a different hearing with the House’s Commission XI, which is in charge of finance.
The central bank, according to BI deputy governor Perry Warjiyo, predicted that the economy would grow by only 5.6 percent in 2015.
Separately, Indonesian Chamber of Commerce and Industry (Kadin) estimates that Indonesia’s economy could expand by 5.2 to 5.5 percent this year under the assumption that fiscal stimulus from the removal of the fuel subsidy will be implemented effectively.
Inflation is estimated to be higher as well compared to last year, as a result of fuel and electricity price increases. Furthermore, the current account will continue registering deficits, stemming from oil and gas trade as well as services trade.
Tight monetary policy cannot solve this issue despite its success to draw short-term portfolio investment, which is vulnerable to sudden reversal, according to Kadin chairman Suryo Bambang Sulisto.
“Overall, Indonesia’s economy will be relatively stable in the future although it is not free from the risk of instability,” Suryo in his office.
original source:http://www.thejakartapost.com/news/2015/01/23/hard-meet-growth-target-finance-minister.html