The worst to come in H1 of 2009: Mulyani

Aditya Suharmoko , The Jakarta Post , Jakarta | Wed, 12/03/2008 6:55 AM | Headlines

The impact of the global economic slowdown will likely peak in the first half of 2009, with exports and investments the hardest hit, Finance Minister Sri Mulyani Indrawati said Tuesday.

“In 2009, the government sees the risk to growth as very real. Exports and investments will be hit hard due to the (poor) performance of the financial sector,” Mulyani said at a hearing with the House of Representatives’ Commission XI, which oversees financial affairs.

“The impact will mainly materialize in the first half (of 2009).”

However, she said that because private consumption growth could be maintained at 5 percent next year, the economy would likely grow between 5 and 5.5 percent.

“The threat of high inflation is not real, so the level of household consumption can be held at 5 percent,” she said.

In the worst case scenario, she warned, Indonesia’s economy could slow to 4.5 percent next year.

The central bank predicts inflation in 2009 will hover between 6.5 and 7.5 percent, down from the 11.5-12.5 percent range it straddled this year. Inflation in November rose 11.68 percent from a year earlier, according to the Central Statistics Agency (BPS).

Private consumption usually makes up about 70 percent of Indonesia’s economy, with exports and investments contributing the rest.

In the third quarter of 2008, the country’s economy grew by 6.1 percent from a year earlier, the BPS reported.

Indonesia began feeling the impact of the global economic slowdown in October, when exports dropped by about 12 percent from the previous month as importing countries slashed demand.

Top global research and advisory firm, the Economist Intelligence Unit, predicted Indonesia’s economy would grow by 3.7 percent in 2009, while Swiss-based financial firm UBS projected 2.5 percent growth.

However, local economists remain upbeat the economy can grow more. Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said the economy could grow by 5.9 percent in 2009, supported by domestic demand, while renowned economist Faisal Basri forecast 5.8 percent growth.

Mulyani said the government was providing a trade financing facility to help exporters and importers. Imports of unessential consumer goods will be reduced to help local industries compete with cheap imported goods, while support for market diversification for exports will be maintained.

To support the real sector, the government will inject Rp 120 trillion (US$9.68 billion) this month and spend another Rp 90 trillion as early as next year to build infrastructure, including roads, bridges, ports, railways and telecommunications infrastructure, Mulyani said.

Rural areas will be given Rp 10.3 trillion to develop infrastructure. Agriculture subsidies have been raised from Rp 27.9 trillion this year to Rp 33.4 trillion in 2009, including Rp 17.1 trillion for fertilizer.

The government is also offering Rp 12.5 trillion in the form of waived income and value added taxes, as well as import duties, to help industries cope with the economic downturn.

Source : www.thejakartapost.com