Foreign Institutions Lower Indonesia's Economic Projection
Monday, 18 February, 2008 | 17:25 WIB

TEMPO Interactive, Jakarta: Several international financial institutions are predicting that Indonesia's economy this year will only grow 6.2 percent, much lower than the initial target in the 2008 state Budget of 6.8 percent.

According to foreign institutions, economic growth will also still be lower than in the planned Revised 2008 Budget of 6.4 percent.

“Foreign institutions lowered the projection of Indonesia's growth by 200 base points from 6.4 percent to 6.2 percent,” said Anggito Abimanyu, Fiscal Policy Agency Head, in Jakarta last weekend.

He cited that HSBC Economics in December 2007 predicted that Indonesia's economy would grow 6.5 percent this year.

But in January, the figure was lowered to 6.4 percent.

The Economist Intelligence Unit lowered the figure from its previous 6.2 percent to 6.1 percent and Goldman Sachs Asia lowered its projection from 6.0 percent to 5.5 percent.

The projection decrease, said Anggito, was in line with the predictions by the International Monetary Fund (IMF).

In January, the IMF concluded that world economy growth would definitely go down, not only in the United States, but also in Japan and the European Union.

Asian economies were still in fact regarded as strong, but would slowly be affected as well.

“The impacts on Indonesia still exist, though not as large as in developed countries,” said Anggito.

According to him, Indonesia's economic growth is predicted to be lower as the world's slowing economy will have a direct impact on national exports.

“Our exports will go down because the world's absorption power will be smaller,” said Anggito.

To a certain extent, consumer purchasing power will also decrease due to the high prices of world food commodities and transportation costs as a result of world oil price increases.

In the 2008 state Budget, the government targeted economic growth to be 6.8 percent.

However, last week President Susilo Bambang Yudhoyono said the government would revise the economic growth target to 6.4 percent in line with the world economic upheaval.

Anggito said that the government would revise the budget earlier as the internal and external conditions were already putting much pressure on the 2008 State Budget.

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