President Sees Robust National Growth

LEGIAN/JAKARTA ~ Southeast Asia’s biggest economy can expect strong growth of 6.2 percent next year despite a global outlook “wrought with challenges,” President Susilo Bambang Yudhoyono said.

Unveiling the 2009 draft national budget, Yudhoyono said Indonesia would be able to further its economic transformation while bringing inflation under control and spending more on higher civil service salaries and education.

“From its dismal condition 10 years ago, Indonesia has transformed today into a dynamic nation full of hope,” he told lawmakers in a major address last Friday.

“However, despite all this our nation continues to be impacted by a number of serious trials … The price of oil has reached the highest level in history. The price of food all over the world has drastically soared.”

The budget predicts economic growth of 6.2 percent with inflation at around 6.5 percent, well down from its current peaks around 12 percent after hikes in subsidized fuel prices and the surge in commodity prices this year.

Expenditure is expected to rise 13.4 percent to Rp1,222 trillion (US$133 billion), while revenue is seen jumping 14.3 percent to just over Rp1,000 trillion, the president said in a speech to parliament.

The government predicts a budget deficit of 1.9 percent of gross domestic product compared with the 1.5-1.8 percent expected this year, Yudhoyono said.

The deficit stems partly from an average 15-percent rise in civil servant salaries and the boost in education expenditure to 20 percent of spending from around 15 percent this year.

Higher costs of living have hit the liberal ex-general’s poll ratings ahead of presidential elections in June and Yudhoyono was keen to use the speech to trumpet the government’s achievements while setting realistic targets.

“We should be grateful that despite the persistent external pressures we have been able to maintain economic growth at over six percent during eight consecutive quarters,” he said.

Economic growth of 6.4 percent so far this year was the best performance since the country plunged into economic turmoil in the regional financial crisis of 1998.

Center for Strategic and International Studies political analyst Pande Raja Silalahi said 6.2 percent growth next year was easily attainable.

“This realistic figure is indeed important for the next presidential election. The government will easily reach the growth forecast and Yudhoyono will tell people that he has managed to achieve what he promised,” he said.

The budget would be geared towards stimulating growth, expanding employment opportunities and alleviating poverty in a country with about 70 million people classified as living below the poverty line, the president said.

Yudhoyono noted that the rise in education spending came “in the midst of the global oil and food price crisis” that forced the government to approve deeply unpopular domestic fuel price hikes in May.

Stung by soaring oil prices, Indonesia will accelerate development of renewable energy sources and change course from a “nation that splurges” to one that saves on energy consumption, he said.

He also renewed his commitment to the “strategic” fight against corruption despite questions over his recent refusal to dismiss two ministers implicated in a major bribery scandal surrounding the central bank.

– Dow Jones Newswires contributed to this story

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