Friday, 8 February 2008

Govt to revise down economic growth

JAKARTA (JP): The government confirmed Friday a plan to revise the economic growth target down from the 6.8 percent stated in the 2008 state budget amid soaring global prices for oil and staple food commodities.

"A downward revision is a must, but we will consider all the plus and minus factors," Finance Minister Sri Mulyani Indrawati told reporters as quoted by Antara newswire Friday. However, she declined to give an exact figure for the new forecast.

On Monday, the central bank said the country's economy would grow between 6.2 percent and 6.8 percent this year.

Mulyani said the latest forecast on the country'smacroeconomic fundamentals showed mounting inflationary pressure as domestic consumption continued to suffer from global price increases.

Last month, the country's inflation rate reached to a 16-month high, with a 1.77 percent increase, due to the price rises for key commodities, such as rice, wheat and soybeans.

The changes have prompted the government to review its assumptions on key variables -- particularly oil prices -- in the state budget while issuing new regulations last week to stabilize prices. These include various tax incentives for the food industry.

The Finance Ministry's latest calculations estimate the government's budget deficit to reach Rp 87.3 trillion (about $9.45 billion), or 2 percent of growth domestic product (GDP), increasing from 1.7 percent in the current state budget.

The revisions to the key assumptions, many economists said, were a result of poor economic forecasting by the government's economic team, which has led to uncertain growth.

(Source: The Jakarta Post, 2008)