[Kabar-indonesia] Indonesia Lowers Growth Forecast in 2006 Budget [2 reports]

[JoyoNews at aol.com]

also: Indonesia govt revises 2006 budget deficit forecast to 1.4 pct of GDP

Indonesia Lowers Growth Forecast in 2006 Budget

By Muklis Ali
 
JAKARTA, June 21 (Reuters) - Indonesia's government lowered
its 2006 economic growth forecast on Wednesday as higher
interest rates and consumer price inflation have taken a toll on
the economy.
 
Finance Minister Sri Mulyani Indrawati told reporters this
year's growth forecast had been revised to 5.9 percent, lower
than the 2006 state budget's earlier target of 6.2 percent.
 
The revision, which will be discussed in parliament, came
after the central bank governor said last week that GDP was
likely to grow at the upper end of a 5.0-5.7 percent range.
 
Growth in Indonesia, Southeast Asia's biggest economy, was
hit by a sharp increase in domestic fuel prices last October,
which fired inflation and forced the central bank to increase
borrowing costs, already rising to support an ailing rupiah.
 
Indonesia's economy grew by 4.6 percent year-on-year in the
first quarter, its weakest pace since 2004.
 
Analysts say growth will pick up at some point the back of
an expected fall in inflation and interest rates. But even after
the revision, some said an assumption of 5.9 percent economic
growth this year was too high.
 
"An assumption of 5.9 percent is too overconfident. I would
put it between 5.4 and 5.7 percent, considering the condition in
the first quarter, combined with the situation in the second
quarter which has been expected to remain weak," Juniman, an
economist at Bank Internasional Indonesia, said.
 
The latest Reuters poll of 12 economists produced a median
forecast for GDP growth of 5.4 percent for 2006 and 6.0 percent
next year.
 
Winang Budoyo, economist of LippoBank said weak consumer
spending this year, as a result of the government's decision to
jack up fuel prices, would continue to hinder economic growth.
 
Consumer spending has been hit hard by the government's
decision last October to more than double domestic fuel prices.
 
Inflation hit its highest level in more than six years,
driving up interest rates to some three-year highs.
 
Following are the revisions of key assumptions in the 2006
budget:
                                             proposed          current
                                             revision       assumption
 
 GDP growth (pct)                          5.9              6.2
 Year end inflation (pct)                   8.0              8.0
 Average interest rates, 3-mth (pct)  12.0             9.5
 Budget deficit, as pct of GDP         1.4              0.7
 Average rupiah exchange rate/dollar 9,300          9,900
 Average oil price per barrel              $62              $57
 
(Additional reporting by Adriana Nina Kusuma, 
Muhamad Ari and Nury Sybli)

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Indonesia govt revises 2006 budget deficit forecast to 1.4 pct of GDP

JAKARTA, June 21 (XFN-ASIA) -- The government has revised its budget
deficit forecast for this year to 1. 4 pct of GDP or 42.4 trln rupiah
from the initial estimate of 0.7 pct of GDP or 20 trln rupiah, Finance
Minister Sri Mulyani Indrawati said.

She told reporters that the higher deficit projection was due to
bigger spending for education, quake reconstruction and interest
payments amid the higher interest rates.

Moreover, she said that due to a rise in the number of poor families,
the government will also have to spend more on the so-called cash
compensation program, which aims to help the poor cope with last
year's double fuel price hike.

For next year, the budget deficit is expected to narrow to 0.9 pct of
GDP or 33.3 trln rupiah.

The 2006 budget revision will be presented to parliament in early July
while the proposed 2007 budget will be presented on Aug 16, Indrawati
said.

The budget deficit will be covered by domestic and foreign financing.

Indrawati said the domestic financing component is estimated at 55.3
trln rupiah this year while net foreign financing is seen at negative
12.9 trln rupiah.

Net foreign financing is the balance between new debt withdrawals and
debt repayments during the year.

She said the total budget expenditure has been revised up to 689.8
trln rupiah from 647.7 trln.

The revised budget will assume a GDP growth of 5.9 pct against the
initial forecast of 6.2 pct; an average exchange rate of 9,300 rupiah
per dollar versu Certificates (SBI) against 9. 5 pct previously.

The year-end inflation assumption has been retained at 8.0 pct.

As for the 2007 draft budget, the government used the following
assumptions: GDP growth of 6.3 pct; average exchange rate of 9,400
rupiah/usd; inflation at 6.5 pct; 8.5 pct average interest rate of the
three-month SBI; and an average oil price of 60 usd a barrel, with oil
production of 1 mln barrels a day.

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Joyo Indonesia News Service
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