- Finance minister proposed 5.2%; central bank suggested 5.1%
- President Widodo’s 7% growth pledge looking tougher to achieve
The Indonesian parliament is set to revise down this year’s economic growth target amid slowing domestic consumption and signs a shortfall in tax revenue will sap public spending.
Ahmadi Noor Supit, head of the house’s finance commission, set the forecast at 5.1 percent, compared with 5.3 percent in the current state budget, after a debate that extended late into Tuesday evening. That was the middle ground between Finance Minister Bambang Brodjonegoro’s 5.2 percent proposal, the central bank’s 5.1 percent and lawmakers who called for 5 percent. Gross domestic product increased 4.79 percent last year, the least since 2009.
“Considering issues on exports, slowing consumption and private investment that hasn’t accelerated enough, we need to correct the growth assumption,” Brodjonegoro said during the meeting. “Five-point-one percent is a number that makes sense for the government.”
The revision highlights President Joko Widodo’s struggle in keeping his election pledge to boost annual expansion to 7 percent in a nation that’s taken a hit from drops in commodity prices over the last few years. Southeast Asia’s largest economy grew a less-than-expected 4.92 percent last quarter even after the government took steps to open up more to foreign investors, cut red tape and boost spending on infrastructure.
The finance commission’s decision will need to be rubber stamped by the parliament’s fiscal agency before being approved, along with the entire 2016 budget, at a plenary meeting. The commission also agreed on assuming an average rupiah exchange rate of 13,500 a dollar this year and an inflation rate of 4 percent, Supit said. The currency has averaged 13,435 so far in 2016.