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The government is forecasting higher growth of 6.6 percent
next year, despite renewed doubts over the achieving of this year's
growth target.
"The figure for next year is still a preliminary one," Finance Minister
Sri Mulyani Indrawati said Tuesday after a Cabinet meeting to discuss
the government's work program for 2008.
"Of course we want higher growth, but we also have to see how this
year, and how this first semester, turn out first."
Mulyani cited the possibility of Indonesia's economy expanding by
between 5.9 and 6 percent next year -- a median figure derived from
analyst forecasts of growth of between 5.5 and 6.5 percent.
For this year, the government is still targeting 6.3 percent growth,
Mulyani said, but the figure could be less as a result of the slow
revival of direct investment.
The government's work program serves as the basis for the drafting of
the annual budget, which includes such macroeconomic assumptions as
gross domestic product growth, inflation and the key interest rate. The
budget is usually revised halfway through its course in mid-year.
"We will need to see direct investment growing by 12.3 percent this
year to achieve that 6.3 percent growth target," she said.
"That will be quite an increase from the 2.9 percent growth (in direct
investment) last year. Many analysts and economists are questioning
whether we can actually achieve this."
She said the government might also have to widen the 2007 budget
deficit to 1.5 percent of GDP, and run another budget deficit next year
so as to ensure more spending on infrastructure.
The economy grew by a disappointing 5.5 percent last year -- mostly on
the back of government spending, which grew by 9.6 percent, and higher
exports, which increased by 9.2 percent. The 2006 growth figure was
lower than the 5.6 percent growth achieved in 2005.
Actual foreign direct investment (FDI) dropped by nearly a third to
US$5.97 billion in 2006 from $8.91 billion the previous year, figures
from the Investment Coordinating Board show.
All this was despite the government having issued special regulatory
packages to encourage infrastructural development and improve the
country's investment climate.
"What this means is that the government still has a lot of hard work to
do," Mulyani concluded.
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