News Focus : Government urged not to set high growth target

"Don`t push through the higher economic growth rate target because it will only increase the state budget deficit," he said.

The government had initially set its economic growth rate target for this year at 6.8 percent compared to 6.32 percent the year before.

But President Susilo Bambang Yudhoyono said the government was not likely to achieve the target amid a global economic slowdown. Therefore, he proposed that the target be lowered to 6.4 percent.

"We are not likely to achieve the economic growth rate assumption of 6.8 percent. All countries in the world have lowered their economic growth targets. We hope our economy will expand by 6.4 percent," the president said.

Some economists have earlier warned of unfavorable prospects for the Indonesian economy this year. The Economic Research Advisory Group in fact likened the 2008 economic outlook to pre-crisis economic conditions ten years ago.

"The Indonesian economy is facing `a cloud of smoke` in 2008," Econit Advisory economist Rizal Ramli said when announcing the group`s 2008 economic outlook in mid January.

Should internal and external upheavals occur, the smoke cloud might grow and lead to economic and social instability in the country, he said.

"If we compare the pre-crisis economic and political conditions in 1997/1998 with today`s conditions, it will be difficult not to arrive at the conclusion that numerous factors that could trigger crisis have emerged albeit with different pressuring intensity," he said.

Bank Indonesia (the central bank/BI) predicted the economic growth rate will slightly decrease this year, approaching the lowest limit of its previous growth forecast of 6.2-6.8 percent.

During a working meeting with the House of Representatives Commission XI early this month, Bank Indonesia Governor Burhanuddin Abdullah said macro economic indicators had deteriorated due to a number of factors.

The first was that the US subprime mortgage crisis and economic slowdown would still continue. The US economic slowdown was expected to lower the global economic growth rate this year to 4.1 percent from 4.4 percent as originally planned. The world economic slowdown would reduce Indonesia`s export performance and growth.

The second was that as a consequence of increased subsidy the government would slash its goods and capital spending to prevent the budget deficit from further soaring.

The third was that the prices of commodities, particularly of foodstuffs and oil, had soared, sending the on-month inflation rate to 1.77 percent in January. The monthly inflation figure brought the year-on-year inflation rate to 7.36 percent, well above the previous target of 5, plus or minus, 1 percent.


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