INDONESIA TO CUT 2008 GDP FORECAST, SRI MULYANI SAYS
Bloomberg - February 9, 2008Feb. 9 (Bloomberg) -- Indonesia will cut this year's growth forecast amid greater "downside" risks stemming from record oil prices and a global economic slowdown, Finance Minister Sri Mulyani Indrawati said.
Southeast Asia's largest economy is expected to grow between 6.4 percent and 6.5 percent in 2008, lower than the 6.8 percent expansion predicted earlier this year, Sri Mulyani said.
``We are working on a new forecast taking into account the prospect of a global recession and the effect of higher commodity prices,'' she said today in an interview in Tokyo. ``Higher growth is becoming even more difficult.''
Indonesia's non-oil export growth has dropped below 10 percent four times in the past five months, less than half the 23 percent average of the previous year. That may threaten tax revenue for President Susilo Bambang Yudhoyono's government, which has increased subsidies on cooking oil and rice and will this year double spending to cap fuel prices.
``If exports slow, that translates into negative growth,'' said Helmi Arman, an economist at PT Bahana Securities in Jakarta. ``The wild card is domestic demand.''
Sri Mulyani is in Tokyo to attend a meeting between finance ministers from the Group of Seven nations and their counterparts from China, Russia, South Korea and Indonesia.
`Very Optimistic'
``We're still very optimistic from the domestic side, but we're looking at the export risks,'' Sri Mulyani said. ``Our deficit will be larger than originally planned'' because of food subsidies, in additional to money being spent to keep energy affordable to consumers.
Indonesia may spend 106.8 trillion rupiah ($11.5 billion) this year in capping fuel prices, up from an earlier estimate of 45.8 trillion rupiah, while it may spend 44.2 trillion rupiah on keeping power costs below market rates, the Finance Ministry said in a proposal submitted to parliament last month.
The government has also set aside 2.6 trillion rupiah to finance a plan to allow poor families to buy 15 kilograms of rice a month at subsidized prices, up from a 10 kilogram limit last year, Coordinating Minister for Economic Affairs Boediono said Feb. 1. More than 15 percent of Indonesia's 235 million people live on less than the equivalent of $18 a month.
Indonesia's budget is also under pressure this year because oil receipts are ``much lower than expected'' as oil rigs are worn out and in need of investment, Sri Mulyani said.
Crude Oil
Crude output in Indonesia, Southeast Asia's biggest oil producer, fell 0.9 percent in January from a month earlier, the country's oil and gas regulator BPMigas said Feb. 4. Indonesia produced 830,553 barrels of crude oil a day in January compared with 837,847 barrels a day in the previous month.
Oil production this year in Indonesia, the only Southeast Asian member of the Organization of Petroleum Exporting Countries, is forecast to be 12 percent lower than its previous estimate at 910,000 barrels a day, the finance ministry said last month.
Still, capital spending by state-owned enterprises and private companies will keep supporting growth in Indonesia's $364 billion economy, according to Sri Mulyani.
Growth of between 6.4 percent and 6.5 percent would be the fastest pace of expansion for Indonesia since the Asian financial crisis of 1997-98. The central bank forecasts growth of between 6.2 percent and 6.8 percent in 2008.
Source: Bloomberg - www.bloomberg.com