ASEAN KEY DESTINATIONS
Indonesia to create jobs, growth with $6.55bn stimulus
Indonesia plans to spend more than 72 trillion rupiah ($6.55 billion) on infrastructure and other projects to boost growth and create jobs, reported Reuters.
The country’s finance minister, who announced the plan, added that further funds were available if needed. The planned spending, equivalent to about 1.4 percent of forecast 2009 GDP, comes as Indonesia sees weaker demand for commodities amid a global economic slowdown.
With parliamentary and presidential elections due this year and economic growth set to slow, the government has earmarked $6.55 billion for projects such as roads, water and sanitation plants, irrigation, airport, ports, and railroads.
It also has 51.3 trillion rupiah of unspent funds carried over from the 2008 budget, which could be used for further stimulus measures, Finance Minister Sri Mulyani Indrawati said.
Southeast Asia's biggest economy desperately needs to improve its ailing infrastructure, which has suffered from years of underinvestment, leading to higher costs for businesses and crimping growth.
By tackling such "structural constraints", Indrawati said, Indonesia may be able to bring down inflation to 3-5 percent in the next year or two, from around 11 percent currently.
Indrawati reiterated the government's economic growth forecast of 5 percent for 2009 at a media briefing on Monday, down from 6.2 percent in 2008. Economists say Indonesia needs to maintain growth of at least 6 percent in order to create jobs in a population of 226 million.
"Domestic consumption and investment will be the main driver of economic growth throughout 2009," the finance ministry said in a statement. "The government forecasts an economic slowdown will occur during the first half of 2009 and will gradually recover as we enter the second half."
In common with other countries worldwide, Indonesia is relying on the combination of higher spending and lower interest rates to spur growth.
Bank Indonesia (BI), the central bank, is expected to cut its key interest rate BIPG by 25 basis points to 9 percent at its next meeting, on Jan. 7, to drive growth after annual inflation eased more than expected in December to a six-month low on the back of cuts in fuel prices.